Is Gordon Brown losing control of the public finances? Net debt as a percentage of GDP is closing in on the 40% ceiling dictated by one of the chancellor’s golden rules. But as if by magic, UK plc continues to enjoy economic growth.
However, should the proverbial happen and the cack hits the fan we will be in for some interesting times. Maybe if Brown spent a little more time running the economy and a little less running for office we might be in better shape. In fact, last week he seemed more interested in the goings-on in the Big Brother house.
The latest interest rate increase by the Bank of England – and there could be another to follow in February – will cause untold misery to millions of borrowers.
But the mortgage market is in robust shape and will more than likely remain so in 2007. And while many of the key drivers in the market remain positive, Mortgage Strategy has to be slightly concerned that the latest rate hike could put the boot into would-be first-time buyers.
With the average property costing more than 150,000, first-time buyers will be hit hardest. Taking first-time buyers out of the market also hits the second-time buyer market and so forth. The result is far from healthy and could lead to big problems in the next 12 months.
While we are still nowhere near the heady days of the late 1980s when interest rates spiked at 15%, Brown must make sure his finger remains firmly on the pulse of the economy rather than being focussed on becoming the next Prime Minister. A failure to do so could be catastrophic. But then so would Brown becoming PM.