Our very own Rob Gill – the man of the markets – gives us the following overview :-
Appalling unemployment figures from the US on Friday have lead to an overwhelming consensus that the world’s largest economy is now in recession. Falling employment and house prices will make for a tricky 2008 across the pond and this was reflected in sliding stock markets across the world.
More interest cuts from the Fed are now likely, and there is optimism that this ongoing programme of rate cuts combined with the fiscal measures announced last year will make this a short lived down turn. Overall this can only increase pressure on the Bank of England to deliver more rate reductions sooner rather than later so barring any nasty surprises on the inflation front a cut in April must now be a possibility.
On Wednesday Alistair Darling faces the unenviable task of delivering his first ever budget in the midst of a major credit crunch. Two areas relevant to property and mortgage finance will be the new regulations for non-Doms and second homes, long awaited clarity will be welcomed on both. A less talked about but potentially significant idea is the introduction of a government endorsed “gold standard” for mortgages in order to help financial institutions identify less risky mortgages.
With securitisation markets effectively closed after institutions were caught out taking on CDOs which combined better quality mortgages with “toxic” sub prime issues, creating such a standard could give banks confidence in what they are buying and help free up this important market.