Workers Revolutionary Party

HOUSING CRISIS LOOMS –as FTSE100 falls to 4,800

Migrant workers in the front of the May Day march in London – defending their jobs and wages

Migrant workers in the front of the May Day march in London – defending their jobs and wages

A MEMBER of the Bank of England Monetary Policy Committee (MPC) admitted yesterday that he is having sleepless nights, worrying about the state of British capitalism.

Adam Posen said he feared the UK economy was facing ‘the renewal of a severe recession if not outright deflation.’

The latest Bank of England Credit Conditions Survey found ‘a slight increase’ in credit availability between April and June.

However, there has been a dramatic downturn in economic conditions in recent weeks.

After a recent ‘boom’ in corporate bonds for ‘high-rated’ borrowers, the crisis of capitalism has reached a tipping point.

‘Borrowers should act now to avoid sleepwalking into a refinancing nightmare,’ warned one City of London analyst.

The housing market is already showing signs of slowing down, with Nationwide, Britain’s biggest building society, reporting that property prices stagnated this month.

The fear is that interest rates will rise and home repossessions will soar.

‘Many lenders commented that a deterioration in the economic outlook could cause the default rate to rise once more,’ said the Bank of England.

‘In contrast to the slight increase in credit availability, household demand for secured lending for house purchase was reported to have weakened for a second consecutive quarter in 2010.

‘Lenders had expected demand to increase in the past three months, as the temporary effects from factors such as cold weather and the ending of the stamp duty holiday waned.

‘But, for some, that anticipated rebound in demand had not materialised.

‘To explain the weakness in demand, those lenders cited continued uncertainty about the outlook for interest rates, employment and the macro-economy more generally.

‘Demand for secured lending for remortgaging was reported to have risen in Q2, (second quarter) for the first time since the end of 2008.

‘But lenders were not anticipating further increases in remortgaging demand given that many existing customers were borrowing at attractively low standard variable rates. . .

‘The availability of credit to the commercial real estate sector was reported to be little changed,’ continued the Bank, repeating that there were ‘concerns about a potential deterioration in macro-economic conditions’.

Varun Bhabha, an analyst at Barclays Capital, said the Bank of England report marked the first time since the first quarter of 2009 that lenders expected the availability of mortgage credit to shrink.

‘It also comes against a background of extreme weakness in mortgage lending,’ said Bhabha.

‘May saw just 1.2 billion pounds of net funds advanced for house purchases, compared with a pre-crisis average of over eight billion pounds per month.’

l The FTSE 100 share index plunged 104.43 points to 4,812.44 yesterday afternoon.

Market analysts Citywire advised investors: ‘Hide! The market is facing a double death cross.’

Lloyds Banking Group, RBS, Barclays and HSBC shares all took a nosedive, as investors sold-off shares out of fear of a ‘double-dip’ recession.

Analysts cut their earnings estimates for Barclays after the bank said conditions for investment banking were worsening.

Barclays, and other banks, were previously expected to generate significant profits, despite the economic downturn in Britain.

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