Market update 20th August - rates, banks and housing market
Posted on 20 August 2009 by
Rates
Bank Of England rate - 0.5% - kept on hold (next decision 10th September)
ECB rate kept on hold at 1% - (next decision 3rd September)
Expectations were growing in the City last night that interest rates could remain at historically low levels for years after the Bank of England gave a strong hint that it might again expand its policy of flooding the economy with money. Markets were taken by surprise yesterday when minutes of the latest meeting of the Bank's monetary policy committee showed that the governor, Mervyn King, had wanted to pump an extra £75bn into the financial system but was outvoted. Gerard Lyons, chief economist at Standard Chartered Bank, said it was now possible that King would not raise interest rates from their current all-time low of 0.5% during his current term as governor, which lasts until mid-2013.
Banks
Lloyds Banking Group is to review its decision to close its C&G branch network, and admits that the decision may now be reversed. A Lloyds spokeswoman said that in the meantime, the branches would not close in November as planned. The Unite union said it welcomed the announcement, but was angry at the "poor management" at Lloyds. Lloyds said in a brief statement that "customers will continue to use the C&G network as usual. All affected colleagues have been briefed by their line manager today."
UK Mortgage / Housing Market
According to the latest figures from the CML, mortgage lending continues to rise. Gross lending in July stood at £16bn, 26% higher than in June, though still more than a third lower than in July last year.
Mortgage lending, house sales and property prices have all picked up in the past few months after a dramatic slump caused by the banking crisis.
But the CML warned the housing market would slow down again later this year, as the CML's economist Paul Samter said, "The CML's July gross lending estimate of £16 billion is the highest level in nine months and consistent with the rise in house purchase approvals," before adding "We anticipate some seasonal slowing in lending volumes and housing transactions over the latter part of the year and the picture of a slow but more stable market to emerge." The improvement in mortgage lending in July was due to the rise in house buying usually seen during the summer, the CML said.
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