House prices driven down by low sales

The Nationwide have today claimed that house prices have continued to fall in October and are now 15% cheaper than a year ago. The latest survey that was carried out by building societies has found that house prices have fallen by 1.4% in the past month. This takes the annual rate of fall from 12.4% to 14.6%. The price of an average house is now nearly £30,000 cheaper than it was a year ago. This will lead to a lot of people being in negative equity as they will be paying more money than the house is worth.

Nationwide have claimed that the fall in house prices is due to the reduction in sales, which are now at there lowest for 34 years. With a recession looming and the instability within the financial market; they are both having a major effect on the housing market. House prices have now dropped for 12 consecutive months. It makes it a lot harder for first time buyers to get there foot on the property ladder. As the banks try and return stability to the financial marketing it is expected that there will be a sharp cut in interest rates which may help buyers.

£1.8 trillion lost in world credit

The Bank of England believes that financial firms have now lost around £1.8 trillion due to the continuing credit crunch. It is believed that central banks and governments have now spent £5 trillion trying to support banks and prevent them from going down.

The bank also warned that if the recent sharp fall in house prices continue 1.2 million homeowners will fall into negative equity. The Bank of England has said that banks could face a lot stricter measures to stop this from happening again. The estimate the bank made on global losses has now doubled since the original estimation in May.

As the economy slows a Recession looms

For the first time in 16 years the economy has shrank between July and September. This confirms that the UK is on the brink of a recession. The drop was bigger than expected with output falling by 0.5%. This saw a knock in UK shares and the strength of the pound fell. If the economy slows in the fourth quarter of the year the UK will be classed as being in a recession.

The chancellor has voiced his confidence in the UK and believes that they would be able to get through it. He commented that it would be a difficult period but was confident that the UK would be able to work through it. The chancellor believes that the UK has to work with other countries to ensure that the efforts are replicated throughout the world.

Consumer inflation reaches 5.2%

In September UK inflation hit 5.2% and this was blamed on the rise in energy bills. However, analysts have expressed that this should be the peak and inflation should begin to fall as a result in the lower price of oil and the fall in consumer demand as the economy tightens.

The Consumer price inflation rose from 4.7% in August. The key issue to be aware of now is to see how far inflation will drop as the food and energy effects slow down and in some cases go into reverse.

Septembers Retail Price Index (RPI) which is used to work out benefits and state pensions in the coming year reached 5% compared to 4.8% one month earlier. Pensions usually increase by 2.5% or by more than the RPI – whichever is higher. This means that the government faces paying billions of pounds more in benefits and pensions.

The recent economic downturn has seen a change from inflation to recession being the key risk to the UK economy. Lets hope we can battle through and face any challenges that are thrown at us.

Bail out of £37bn unveiled for UK banks

The government has announced that it will inject up to £37bn of taxpayers money into Royal Bank of Scotland (RBS) Lloyds TSB and HBOS. RBS is to raise £20bn with a further £17bn being put into the HBOS and Lloyds TSB. On the brighter side of things Barclays is to raise £6.5bn without any government help.

These bail out plans mean that they taxpayers will own around 60% of RBS and 40% of the newly merged Lloyds TSB and HBOS. Both of these banks chief executives and chairmen are to resign after they have asked for the bail-out money. This cash is part of the money that the government pledged last week in a rescue plan that aims to stabilise the financial market.

These announcements can be seen as some of the biggest days in banking and is a humiliation for the countries top banks. The government are putting more and more money into these banks in order to try and help the economy. What are your views on this? Let me know.

UK treasury in talks with Iceland

There is a party of officials who are visiting Iceland today to discuss the banking crisis and the impact that this is going to have on UK depositors. After some very heated discussions between the Icelandic and UK leaders; has lead to the meeting happening.

The UK government are very keen to ensure that the £1bn that has been invested in Icelandic banks is secure and that it can be recovered quickly. A lot of local councils and public bodies have used Icelandic banks to deposit there money.

Whilst over there they are also keen to find out what the situation is for UK individuals who are currently in the unknown. However, the turmoil that currently exists within the Icelandic market means that they are highly unlucky to give any reassurances about foreign deposits.

Time will tell to see if peoples deposits will be returned and let’s hope that the meetings that are taken place will lead to some positive results in such a difficult time.

A glimpse of light as some shares increase

After the news that interest rates had been cut by 0.5% shares have mainly increased in Asian and European businesses. The UK’s FTSE 100 saw an increase by 1.3% as banking shares helped push them up. In France the Cac 40 rose by 2% and in Germany the Dax increased by 0.5%.

There was also a rise in financial shares as HBOS was up by 30% and the Royal Bank of Scotland added 15%. However, Japans Nikkei index closed lower after the prime minister had urged more action to try and boost the countries economy.

However, there is still an awful lot of work that needs to be done to try and stop the country fallen into a recession. We all hope that this small glimpse of light will help the economy turn around although I am sure there are still some tough times ahead. Let us know your views on these issues.

Government to help UK Banks

The UK government has today announced that they are going to put a package in place to help the UK banking system. The total amount of help that the government are providing could rack up to a staggering £500 billion. The first part of the plan will see extra capital become available for 8 of the UK’s largest banks. In return the government will get preference shares in the banks. Prime Minister Gordon Brown has said that he hopes this backing will put the UK banking system in a stronger position.

However, as the news was announced the FTSE 100 in London fell by 4%. Some banks have seen their shares rise dramatically after the news whereas others have still continued to see a fall. Some of the key measures within the plan include:

Banks will have to increase their capital by £25bn and can borrow from the government to do this.

A further £25bn capital will be available but for an exchange of preference shares.

Those banks that want to participate will have to sign an FSA agreement which looks at executive pay and dividends.

Today’s measure will see £1,600 of each taxpayer going towards this scheme. Let me know your views on today’s actions.

Banks Share prices fall

I haven’t written an article for a few days as I have been following the situation with the current economical crisis. I was hoping that I would be able to come back and write an article telling you that the situation was improving, however – no such luck.

It has been an extremely turbulent time once again for banks as they have seen there share prices fall sharply today. There is lots of rumours suggesting that this is due to a meeting that was held between bank chiefs and the chancellor Alistair Darling to discuss fundraising. The meeting was called to try and come up with a rescue bank especially as many foreign banks are pledging that all of their customer’s money is safe and not just up to £50,000 as UK banks have agreed. This is causing a lot of people to look at putting there money with a bank outside of the UK who is promising that all of there clients money is safe.

The economical crisis just seems to be getting worse and with the government trying to deny that the country is going into a recession no-one knows what is going. It is simply going to have to be the case that people try as best they can to weather the storm and come out of it at the end.