Sky News business editor Michael Wilson

Forgive me for revisiting a bit of yesterday's territory, but the credit crunch is getting close and personal.

We covered the rise in unsecured (credit card, store card, catalogue) lending yesterday.

We await an update on the most recent shocking figure - in those households which have non-mortgage lending, the average, repeat average level of household debt is £21,051 - but it's clear that with mortgages becoming rarer and more expensive, people are unwilling to rein in their lifestyles, and are plunging further into the never-never.

And, as the admirable Lib Dem spokesman Vince Cable, notes, there are now three million households in which the mortgage accounts for 90% of the value of their homes.

It won't take much of a dip to put them into that awful state of negative equity which many remember from the early nineties. Not a pleasant experience.

Officially, the Bank of England is noting even more serious credit squeeze consequences, with its quarterly credit survey showing that lenders are expected to offer even fewer mortgages in the next quarter than in the first three months of the year.

That comes after more than two thirds of mortgage deals have been withdrawn by lenders since last July, with around a further ten per cent vanishing in the last week alone.

So, even more of an interest rate dilemma for the Bank next week. One of the rate setters, Andrew Tucker has implied that while they want to cut gradually to cushion the credit crunch, there's also a need to let the economy slow to curb inflation.

It looks now as if a quarter per cent cut would satisfy both sides of that argument. But in the financial turmoil of recent months, we've all learnt that guessing games are the hardest to play...

Comments

[Elizabeth Davies Cape Town 4 Apr 2008 14:30:22]

Rates, Rates, Rates.
The worst thing that can happen from this credit squeeze will be "heart rates", or even heart failures!
Tough times drive most people to the doctor, more strain on the NHS. Money worries are the number one reason why people have heart attacks. But people must reign themselves in, and cut up the plastic, tough times call for tough measures.
"I'll give you a winter prediction.
It's gonna be cold
It's going to be grey and it's gonna last the rest of your life" Ground Hog Day, and most people think summer is on it's way...oh boy!

[Christopher Walkey from France 4 Apr 2008 08:06:56]

There is alot of volatility in the markets at the moment. Shares affected alot are banks and housebuilders. This is obviously a reflection on the credit crunch and the housing market. America's spending has hit a 15 year low. The Dollar has also seen it's biggest weekly drop in a month against the Euro. The British Pound has also reached a record low against the Euro. House prices in America keep falling with another 10% drop last month. The UK house prices have fallen again for the sixth month in a row. Sales in America and Europe are falling. Consumer confidence around the world is very low. With the true level of inflation much higher than official figures, unemployment figures increasing many people in the UK are now saying it's not a case of if but when the recession hits.

[Dennis, Cramlington Northumberland 3 Apr 2008 22:32:51]

Thank you Michael for cheering us all up.

But, why do you have to quote the BoE figures of mortgage cutbacks via their quarterly credit survey, when the same (and probably more accurate) info comes from the CML?

Besides, don't we all know that Mortgages are in short supply, because your own channel are telling us, every 15 minute, that the world is to end soon because First Direct, the Co-op, Nat West, Cheltenahm & Gloucs are all cutting back on Mortgage lending, even to good people.

And, of course, the Government Mortgage Company (once the highly successful and efficient Northern Rock Bank) is now working really hard to retain unnecessary decent staff, as long as possible, to appease the Unions and the NE Hon Members whilst the Company does it best to fall well short of the best buy tables, and meanwhile get rid of as many loyal and safe & secure regularly paying borrowers as it can, just to asset strip this once great Employer, and get this Administration 'off the hook' asap?

Has anyone the decency to make it clear to the nation that Mr Applegarth, whose risk taking business strategy worked well for years (with many current accusers taking full advantage where & whilst they could)is the not the only person who can be blamed for this debacle and loss of confidence.

English Banks are now getting - in profusion - the very same support from the BoE which was so evidently slow and very public in coming to NR from the Moral Hazard man - a Moral hazard which now appears to have been conveniently forgotten as the big players and friends of the City now come up against their particular form of nemesis...

Stop asset stripping the Rock, give the shareholders a stake back, even in the new company (it is only fair) admit your shortcomings Government people, and stop making Applegarth the scapegoat for your inadequacy.

That's cheered me up anyway, Michael.

Dennis
Cramlington
Northumberland...
...A region now or soon to be totally devastated by the inept handling of the NR blip by this Labour Government...

What say you, Bank of England man?

[Khalid 3 Apr 2008 12:42:26]

Sir
As many an economy strives upon prudence budgeting, the humble households not only provide future stability alongside the thrills of the [Royal Philharmonic Orchestra] but also relies very much upon real life exeprience.
Therefore jitters not only inform and eductae but provide much to reconsider ones foundations.
So, as for the cut in rate or low inflation, [If You Knew Souza] she would say it remains a independent matter for the BoE.