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Massive mortgage squeeze

Robert Peston | 08:11 UK time, Tuesday, 25 November 2008

Net new mortgage lending is likely to fall to less than zero next year, according to a report commissioned by the Treasury from Sir James Crosby, the former chief executive of HBOS, owner of the Halifax.

Row of housesSir James is warning that as homeowners are paying off mortgages, banks are putting less money back into the housing market than they are taking out.

This represents a wholly unprecedented collapse in funding for the British housing market and Sir James says it's likely to lead to further declines in house prices, falls in consumer spending and a rise in unemployment.

It comes after net new mortgage lending has already fallen from £108bn in 2007 to a forecast £40bn this year.

Net new mortgage lending has never been negative, since records began.

Sir James is particularly worried about the impact of the collapse in housing finance on Britain's battered housebuilders. He says that they are dependent on mortgages worth 85% of the value of homes being sold, and that the provision of these has tumbled.

Part of the cause of this drying up of finance is that banks are having to redeem £160bn of bonds backed by mortgages over the coming three years, when it expects to receive just £150bn in deposits from ordinary savers.

That's why Sir James is recommending that the Treasury auction £100bn of insurance to wholesale providers of funds, which banks would then lend in the form of mortgages.

The chancellor said yesterday that he'll provide the support, if he's allowed to do so by the European Commission.


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  • Comment number 1.

    Dear Robert,
    Mortgages, --- House prices are the fault of Estate Agebts, Morgage issues the fault of the Lenders, Between them they have "Castrated " the market,
    House prices are Massively over priced, and no one will lend until the Market has come back to what is normality, even if it means a massive fall in house prices WHICH IS GOING TO HAPPEN.,
    Banks are FORCING people to sell their homes to pay off Credit on their cards, in fact there is no let up in the Banks cruel unsympathetic dealing, with their account holders, BANKS ARE THE PROBLEM, they are crucifying everyone they can when it is their fault all along with The lenders, and the estate agents that this crisis is deepening.
    This is really going to end in Tears, and Britain is definately on the brink of an Economic disaster.

  • Comment number 2.

    I don’t know why Brown didn’t reverse a Tory tax rise (introduced at a time when they were scrabbling for revenue themselves) and remove VAT from building work (it’s levied on all improvements - everything except new build).

    It would help the builders - and people usually have to buy things to go in the extension/loft conversion.

    Plus, bricks, plasterboard and mortar are some of the few things we still produce in the UK. Companies like Baggeridge Brick have been mothballing their plants as demand collapses.

    The 2.5% VAT cut will have about as much effect as the stamp duty cut did ...

  • Comment number 3.

    There was a wonderful cartoon of John Major at about this time in his tenure, showing him as manager of a bottle bank. We appear to have a few clones running this country now.
    What was required yesterday was a speech of Churchillian proportions. What we got was a balding ditherer who ghad not prepared his dossier ("if allowed to do so" - he's had enough time to get that approval, which he didn't actually need in the circumstances, when we look at what's been going on within Europe of late).
    And a new banking system.

  • Comment number 4.

    On one hand this is worrying on the other it makes sense.

    Mortgage lending had lost site of reality as indeed had house buyers.

    The contraction is needed to bring house prices down to more sensible levels and to avoid people overstretching themselves (which despite the math they seem hell bent on doing).

    If lending principles such as 3+1 times salary had been maintained and landlords forced to take repayment mortgages much of this unsightly mess could have been avoided.

    I appreciate that this is a simplistic view to a complex problem but bottom line had the banks/buidling societies have followed their traditional business models without getting greedy none of this would have ocurred.

  • Comment number 5.

    Total Nonsense!

    This kind of rumour is what is going to drive us into an economic collapse.

    What utter rubbish!

    Prices will find a bottom and then will be underpinned by rents and the banks will lend the money which is being pumped into the market by the Gov.

    Come on !

    Please use some common sense here.

    The banks would love to make things worst so they can charge us more for doing far less but the reality is they need to make money and an all out scenario painted above would only cost them.

    This logic err non logic errr idiocy is what got us here!

    Back to basics I think.

  • Comment number 6.

    Not really a shock this, is it?

    The housing market was an inflated bubble that is not so much bursting as slowly deflating.

    Prices are regressing to mean, and they will probably compensate in the years to come by a severe undervalue.

    I suspect that "safe as houses" is going to have a new sinister meaning in the years to come.

  • Comment number 7.

    whoopee Bert - another headline grabber!

    evryone knows that 2007 was crazy in terms of lending so lets not constantly refer to it as the benchmark

    take a more balanced long term look and talk a wee bit of sense for once

  • Comment number 8.

    This is really serious because the wider economy cannot even start to recover until the housing sector stops deflating.

    It just shows that the Chancer of the Exchequer has really missed the point with his emergency measures.

    I saw Newsnight last night with Yvette Cooper, Dominick Grieve and invincible Vince Cable. While Cable and Grieve were making sensible balanced points, it seemed like all Yvette Cooper could say was "well we've got to do something".

    Now Yvette Cooper may be a highly intelligent capable minister, but she didn't come across like that because she had to trot out the Government line. She had clearly been drilled into automatic on-message responses to all the questions. This gives the impression that if ever they step off the hymn sheet and get involved in a realistic debate, then it will all fall apart. This is probably because the first step is an admission that they have got it terribly wrong so far and it's very likely to get worse.

    Coming back to what to do, there is no guarantee that doing something will necessarily make things better for people. On the other hand, there is a strong possibility that doing the wrong thing will constrain the possibilities for doing something useful in the future. So I would want a lot more of a justification for action than just saying "you can't stand by and do nothing". Doing the wrong thing now is much worse than doing nothing because it wastes the resources that would be available to help people later on, when they really need it.

    I would say start to sort out the real underlying problems, the debt mountain, the burden of public spending, the fact that real productive jobs and businesses are going under because of the credit constraints, rather than throwing good (albeit borrowed) money after bad.

  • Comment number 9.

    So i was wrong robert...

    I did say a few weeks ago that the average price of a house in the uk would be 94,000 by the time they reached there true value. you have to go back to around 1985-86 then add 1% to 2% increase from then, hosue price never fell back to there true value in the last crass. which mean the average price of a 3 bedroom house will be around 70,0000. i think that figure just put about everybody in negitive equity.

  • Comment number 10.

    As a lot of newly built houses are rubbish anyway we shouldn't be too sorry for the house building industry. I wouldn't buy one - even in this deflating market. Old houses may be drafty and not very fuel efficient, (at least the windows are in the right places and don't face brick walls) but you'll know the house will last the life of the mortgage!

  • Comment number 11.

    I am not sure why anyone would wish to take seriously a report from Sir James Crosby. Lets bear in mind that Crosby was the CEO of the now collapsed HBOS Bank until 2006 and should therefore take a major responsibility for that Bank's approach to risk management and lending which took it to the brink of disaster this year.

    It's therefore hard to take seriously anything that Crosby says and the Treasury would have done better to have reconstituted the review under the aegis of a more credible chairman.

  • Comment number 12.



  • Comment number 13.

    If, as it would seem, the taxpayer has been conscripted into supporting the financial institutions and that those selfsame financial institutions then fail to support the taxpayer in return then we taxpayers have to ask why are we supporting these financial institutions?

    Perhaps it would have been better to allow all those dodgy banks to crash and leave a great big mess behind. Perhaps we could have all made a few bob picking over the wreckage.

    I am starting to doubt everything now as it is quite clear to me that stability is only about supporting a greedy and incompetent ruling caste in their privileged positions and comfortable pensions.

    If the taxpayer cannot have the stability that allows the taxpayer to benefit, then why pay taxes?

    Time for a revolution, methinks! Tumbril manufacturers should be a buy.

  • Comment number 14.

    labantall: There would be no point reducing VAT for builders as they, as companies, can claim it back.

  • Comment number 15.

    Given the critical nature of housing to the overall economy, will the government STILL believe in a near-term, brisk economic recovery in the light of this grim news for the housing market?

  • Comment number 16.

    Can I also point out:

    VAT rate is cut from 17.5% to 15%.

    This is a 2.5 percentage point cut.

    It is a 14% reduction in the tax rate.

    However is is only a 2.13% reduction in the consumer price.

  • Comment number 17.

    Robert this is why these toxic institutations should have been allowed to fail.Im afraid that Brown has missed a real trick yesterday to solve this crisis in one fell swoop ie stop anymore govt money going into failed institutations let them rot and wither away and get the goverment through the lender of last resort to start lending money directly to the business and households that needs it and will circulate it back into the economy on normal commercial lending rates although interest rates should be cut today to 1% this would have ensured that employment was maintained and the practices of the hidious banks would be dommed for evermore

  • Comment number 18.

    As part of my job I have to research the housing market from all angles. There are two really serious issues which are going to arise in the next year which could decide the immediate future of the market.

    First is the Buy to Let market (or should that be Lie to Let?). Over the last couple of years there were increasingly hysterical claims about investment potential and increasingly attractive offers being made to tempt buyers. One of the most popular was the 'guaranteed rent for 2 years' offer.

    On the face of it, it seemed like a good deal, you paid 10%, you were guaranteed a rent which would cover the mortgage and the property was certain to double in value over the next five years or so. What could possibly go wrong?

    As any fule kno, if it seems to good to be true, it probably is. Whilst most of the BTL landlords in this secanrio are certainly aware that their flats have gone down in value and their mortgages may go up, what they are not expecting is to find that the developers were horribly over optimistic with their prices. I recently spoke to one who offered a £1,000 per week flat for £400, as that was the current market value. He didn't care, the developer was paying the rest for the next year or so and the landlord was none the wiser. The landlord is in for a horrible shock next year when he finds that the rent he was taking for granted is halved or worse - on top of the other problems that he is already experierencing.

    Many landlords will be caught out by this, and new build city flats are about as easy to sell as US foreign policy at the moment. Quite a number will inevitably get repossessed which brings me on to the second topic.

    What, at the moment, is the point of repossession? The banks are simply incurring more losses every time a property is taken back. In the current market they have no hope of realising more than 50-75% of the original price, which in most cases means a loss for the bank - and that is if they can in fact sell it.

    Why is there not government guidance to stop repossessions and institute a form of rent-back scheme like they do in Australia.

    Oh and one last thing - anyone spoken to a Canadian bank recently?

    The ones I have spoken to seem to be doing very nicely indeed. Why? Because they weren't allowed to get involved in trading in dodgy mortgage backed securities. So for Crash Gordon and his 'chancellor' to claim it's not their fault is rubbish. Other countries aren't having the problems we are so it is clear that with better regulation the problem would not have occurred.

  • Comment number 19.

    Sir James with respect hasn't got a clue!

    Isn’t it Sir James and his opposite numbers who have caused our problems?

    And now they want a bigger buffer and a bigger margin for all the loans they made to people who should never have been given a car loan, much less a mortgage on a house.

    Anyone with any sense will be looking at property for his or her future income the stock markets and bond markets have proven to be a far higher risk.

    Come on Robert do the numbers please.

    20-year periods since 1960 etc…

    You know how to add up don’t you?

  • Comment number 20.


    At last the end of the era of CRAZY house


    How long before BROWNS era comes to an


  • Comment number 21.

    So having 'bust' HBOS, Sir James now wants to do the whole country by suggesting the same approach to lending.

    It has now been said numerous times on this blog and hundreds of others that house prices are just too high. Even the BBC has woken up to this and is answering serious questions of Darling and Brown.

    Net lending needs to turn negative in order for the market to return to anywhere near normality. For the last few years lending has been reckless and now it is payback time.

    In the meantime, Darling and Brown are confused about whether this whole mess was the banks fault for the reckless lending in the first place, or whether the banks should be forced to lend at those levels again. Yesterday's PBR was actually quite reassuring that despite the hot air, Darling seemed to suggest nothing to prop up the housing market.

  • Comment number 22.

    Please remember Sir james is a huge shareholder in HBOS which in turn owns large stakes in many of the housebuilders and whose business is also 20% of the UK mortgage market.

    Much of this statement is feathering his won nest so to speak. House prices need to fall 50% top to bottom to go back to a median average and with this in mind we should expect falls next year.

    And over-extended housebuilders going out of business.

    Glad to see though yesterday that the BBC is finally looking past the New Labour spin a little and at reality instead.

  • Comment number 23.


    Poeple will be wanting to be repossed. would you want a mortgage worth ten of thousands less than you payed for it? I think not. the flood gates will be opening to get rid of there keys and the massive debt incurred from these over priced homes

  • Comment number 24.

    This surely is an entirely foreseeable re-balancing of house costs. House prices went up because the mortgage market was inflated by the money market short term fixed mortgages. The funding for this will inevitably dry up and more people will have to move to the standard variable rate of old.
    House prices will fall then the market will move again.

    What it does however question is the ever increasing cost of nationalising Northern Rock. I cannot ever see us getting that money back.

  • Comment number 25.

    #13 "I am starting to doubt everything now as it is quite clear to me that stability is only about supporting a greedy and incompetent ruling caste in their privileged positions and comfortable pensions."
    Interesting point.
    Wouldn't have been cheaper to let the banks go under and pay the savers deposits up to the level of £35,000 as they were set before the Northern Rock crisis? Few have more savings and most far less. Well run banks like Santander would have picked up the banking assets. This "stability" means a class of failed financiers and bankers and bank overseers are still in place, and the rich are being funded by the poor.

  • Comment number 26.

    PLEASE take the time to consider the mathematical probabilities and full implications of this comment. I need an informed assessment of the beyond- chancenesss -anyone qualified to comment out there - PLEASE.

    (#3-the information below indicates that the current banking system is working exactly as Bush anticipated)

    I first posted this prediction on 8 Oct on another site and later on Have Your Say. It read:

    " Added: Friday, 24 October, 2008, 15:25 GMT 16:25 UK

    Re: Dow Jones closing price.

    I see the next significant low being 7,6ish (7,652 to give almost certainly unreliable detail).The significance of 7,6.. is-
    - It occurs when Bush is less affected by share prices and no longer seems to take responsibility for the markets, indicating it will be at least not until very close to the election.
    -After it occurs, trends become much less chaotic as the full implications of actions taken by Bush in the first week of Oct become known."

    On 23 Nov I posted the result:

    "Context - DOW closed at 9,447 on 7 Oct.

    SINCE 7 Oct there has been a continual downward trend in the closing
    ON 20 Nov the DOW closed at 7,552

    "NEW YORK, Nov 21 (Reuters) - U.S. stocks surged on Friday to cap
    another volatile week as investors greeted with relief reports that
    President-elect Barack Obama has chosen his point person to combat the
    U.S. economic crisis, lifting a major uncertainty from markets.

    Stocks limped into the day after a back-to-back pummeling that had
    left the S&P 500 at an 11-year low, and spent most of the day drifting
    in and out of positive territory. They shot higher around 3 p.m. when
    NBC news reported that Timothy Geithner, president of the Federal
    Reserve Bank of New York, would be nominated as U.S. Treasury secretary."


    The prediction was the sum of two parts. First, I identified the
    APPROXIMATE closing price at it's next significant low. I took this
    to be 7,6(ish). Then the same technique was applied to find the
    detail (i.e. the last two numbers). I took these to be 52 and simply
    added them to 7,600 without considering the issue of rounding. I
    neglected to take into account the fact that 7,552 is nearer to 7,600
    than 7,652. I inadvertently rounded up, I shoud have rounded down.

    It is interesting that I chose to share the detail I regarded as
    "almost certainly unreliable" and that it has lead to such a valuable
    learning experience for me."

    This prediction came from remote viewing Bush's thoughts regarding how bad things would get whilst he was still accountable. I consider my prediction was at least broadly correct, therefore I deduce he had been provided with very accurate forecasts and the current situation was anticipated.

    With best intent
    Loraine Connon

  • Comment number 27.

    Mortgages should be pegged to a multiple of the TAX the borrower has paid over the previous three years.

    That way the price rises are linked to Government income and the prices will not rise out of control. This would also increase government revenue.

    The Government must introduce systems, which stop BANKS competing for business in a way which causes financial bubbles.


  • Comment number 28.

    #11 as opposed to the reports by Derek Wanless - the failure at Natwest - or Martin Taylor - failure at Barclays etc etc.

  • Comment number 29.

    This is the kind of irresponsible reporting that has exacerbated the current crisis.
    This is one man's take on the problem, an ex boss of a failed Bank.
    We are told we need confidence back in the market and this kind of irresponsible talk will do nothing.
    However if he is right and the banks are seriously underfunded because of total incompetence, mismanagement or even possibly fraud then maybe its time for an inverstigation by the Serious Crime Squad because bonus were still being paid in the City when quite honestly the accounts were quite clearly not showing the full scale of the crisis.
    Who was hiding what?
    the Banks have had unprecendented support by the Government/us so now owe it to the Country to get things moving again.
    They messed up for the rest of us.
    Maybe the Government claws back the money from the Banks, sets up a totally nationalised Building Society and gives affordable mortgages to first time buyers, so that the housing market can start moving again.
    If the Banks won't, can't then we need to side step them. The Country cannot be held to ransome by a few incompetent City, not so, slickers.

  • Comment number 30.


    Yes there would be a point in removing VAT from building work as it would encourage people to commision the work in the first place. The fact a builder can claim back the VAT is entirely moot if no one is having any work done.
    The removal of VAT would be to act as a stimulus for demand (with all the additional benefits for the building materials supply industry).

  • Comment number 31.

    #8, i missed that. Did she claim it all started in the US, mention global recession, 15% tax under Tories, lowest rate of debt, best-placed for the recession and taking the lead?

    Why we don't just replace the entire government with tape recorders I don't know. Think of the savings....

  • Comment number 32.

    @ 20

    You can't really believe that the Tories will be any better can you?

  • Comment number 33.

    If you look at affordability of houses in terms of average income over the last 40 years, then from _today_ house prices probably have another _40%_ to fall before they reach the bottom of the last three cycles which were between x3 & x3.5.

    You can talk about increasing demand and limited supply due to increasing population, more single people and restrictive planning, but ultimately, most people were only willing to stretch themselves to the recent extreme levels because they thought houses were a one-way bet and that to not be on the ladder meant they would never own a house.

    They don't think this any longer and believe that house prices are now going to fall and that they can't afford as much anyway.

    The best thing that can happen is that the fall happens quickly and we get on with the recovery and dealing with the fallout.

    This budget will do nothing but make the fall deeper and the recovery slower, because the promise of future tax rises will make people even less likely to spend. This is perfectly rational and is exactly the reason why Keynesian policies fell out of favour - they don't work if people understand the implications of the governments actions...

  • Comment number 34.

    The terms "UK" and "economic collapse" seem to be moving ever closer together, eh Mr Peston? So much for the garbage being churned out by all political parties at the moment.

    As usual, Vince Cable stands out as the only politician in the Kingdom able to talk any sense right now. However, even he hasn't yet espoused the killer answer to this increasingly disastrous looking problems we're facing.

    The simple answer, in fact, lies in the dreaded term "deleverage". We have to wind back from our gross indebtedness and live within our means, and we have to do it now. The pain will be agonising.

    The politicians are scared witless about the implications and consequences of such deleveraging and so, er, they borrow cosmic sums of money in order to defer the pain. Meaning that the eventual agony will be little short of unbearable when it comes.

    This is why we have politicians: to tell us what we want to hear, not to do what needs to be done. You have to get on and do that yourself.

  • Comment number 35.

    All this means is that more mortgages will be paid up rather than new money handed out.

    There isn't much sense trying to force property to turn over at bubble prices, which they still are. Until regulation (whether self- or official) allowed the loan-to-value ratio to go crazy in the past few years there was the yardstick that mortgages were within 3 to 3.5 times a given salary. That went out of the window. Prices are still 4 to 4.5 times salary so they are a dodgy proposition for most potential buyers.

  • Comment number 36.


    'This prediction came from remote viewing Bush's thoughts'

    'Remote viewing'?

    Er, how does that work then?

    I bet you can't 'remote view' what I'm thinking right now.......

  • Comment number 37.

    All this means is that more mortgages will be paid up rather than new money handed out.

    There isn't much sense trying to force property to turn over at bubble prices, which they still are. Until regulation, whether self- or official, allowed the loan-to-value ratio to go crazy in the past few years there was the yardstick that mortgages were within 3 to 3.5 times a given salary. That went out of the window. Prices are still 4 to 4.5 times salary so they are a dodgy proposition for most potential buyers.

    There's no sense in trapping Mr & Mrs Average into repayments that will be unaffordable for most of the their lives so I hope prices will continue to fall.

  • Comment number 38.

    We should all look on the bright side people. We will all get to know our neighbours better when where poping around to see if we can borrow that bit of sugar or milk, they where the good old days and maybe it wont be such a bad thing to return to them. Communities where much better and closer then.

  • Comment number 39.

    Given that we are expecting deflation (at least in RPI terms any way) and a reduction in GDP why should it be suprising that mortgage lending is to contract - this is before taking the bond turnover/repayment issue in to account.
    What about contraction due to the other 100s of bn GBP that was pumped in to the mortgage system via the money markets since 2001 (the last year it was net funded by deposits) as that will have to work it way out of the system too. This is not just a next 3 year problem it keeps going until we have worked the excess money out of the system. No one will want to invest in UK proprerty bond products for a long time. Does any one think there are going to be enough buyers for these proposed insurances given the government is trying to raise 1.02tr GBP anyway given alot of other countries will try to do the same?

    Re 18: Yes I did the employees seemed happy about their job security too...

  • Comment number 40.

    no housebuilders - fine

    no supply pent up demand - hey presto prices back up and we are all saved

    it'll take a couple of years but trust me

  • Comment number 41.

    All this means is that more mortgages will be paid up rather than new money handed out.

    There isn't much sense trying to force property to turn over at bubble prices, which they still are. Until regulation, whether self- or official, allowed the loan-to-value ratio to go crazy in the past few years there was the yardstick that mortgages were within 3 to 3.5 times a given salary. That went out of the window. Prices are still 4 to 4.5 times salary so they are a dodgy proposition for most potential buyers.

    There's no sense in trapping Mr & Mrs Average into repayments that will be unaffordable for most of the their lives so I hope prices will continue to fall. The news

  • Comment number 42.

    Crosby a major architect of HBOS 's demise is giving advice to the Government,give us a break and disappear again.

  • Comment number 43.

    There has always been some merit to me of a political system run by a benign dictatorship, as opposed to elected by an uninformed democracy.

    Sadly we now have an uninformed dictatorship, and a democracy becoming rapidly malignant.

    How much worse does the government need to get before the electorate see what is really happening to them - ALL of them, rich or poor.

    If the Tories or Lib Dems can't enage the voting public at times like this, then nothing will raise voters form their slumber.

    If Brown & Darling were Chairman and CEO of a listed Company they would been voted out long ago by shareholders for creating and implementing policy not in the shareholders best interest.

    The core ability to plan ahead, set a budget, and make relevant decsions. No wonder Brown and Darling are languishing in the payscales just below the £150k mark, well off the Chief Execs of Tesco et al - people who actually do something!!

    When will the public wake up to this incompetence, and stop swallowing random soundbites in total belief they are right.

  • Comment number 44.

    re #9.

    Not everyone will be in negative equity.

    I, like 40% of people do not have a mortgage.


    Because I paid it off. In the good times, I still watched the pennies and put most of the spare into the mortgage rather than keeping you with the Joneses or spending on stuff I did not need.

    Now, things are tight, I am sitting pretty, busy using savings to buy shares in good companies at prices that in 5 years time will look cheap.

    Smug? No.

    Saving in goods times to ride out the bad times is just good sense.

    Shame, that Gordon believed his own hype and failed to do it.

  • Comment number 45.

    Lorraine, you posted this yesterday and for the first 3/4 paragraphs would have prompted some thought.
    By trying to justify why your original prediction was out and was actually correct, you started the alarm bells.
    You really blew it in the last paragraph - remote viewing, please!!!!

    Anyone with the skills to propose an answer is also likely to be clever enough not to rise to providing an answer.

    You are trying to get some specious proof that your remote viewing prediction cannot be by pure chance or is so unlikely that the number is very large. You are patently not trying to prove Bush or anyone else knew what the figures were.
    I suggest you probably acquired the base 7600 ish figure from many reports which were available at the time from market reports of their expected floor level at the time. Albeit not conciously.

    I suggest you post this on a flat earth website or similar where some obliging fool will provide the numbers you seek to justify your belief in this twaddle.

  • Comment number 46.

    Robert - on the whole, excellent and balanced analysis these past few blogs.

    However, I am desperately sad for the people of this country.

    Labour has ruined our public finances to the point where, by their own figures, they will take almost a generation to put right. According to Labour's figures, Britain will have higher real terms public debt that we had at the end of WWII. Terrifying. And, the whole basis of these figures is rose-tinted. If it's worse, we'd all better start praying - or leaving the country.

    I remember pretty vividly the bitterness of the 1980's when Thatcher had no choice but to impose incrediably tough measures after Labour's IMF bailout and winter of discontent. It took the best part of a decade to put right, and the pain was such that much of the north of the country remains scarred even today. That's a big part of the reason why some people viscerally hate the Tories. Even today, let's face it, many in the BBC and elsewhere view the Tories as the 'nasty' party. But let's remember the mess Thatcher inherited in 1979: she didn't have a choice. And as a country, we couldn't even afford to ease the pain.

    And yet, having been through all that pain to achieve such hard earned gains, here we go all over again. Labour haven't learned. And once again, it will most likely be the unfortunate Tories who have to administer the bitter medicine. No doubt with the Left spitting blame from the sidelines, without irony.

    We are going to have to go through the early 1980's all over again: public strikes, protests, the lot. And all because Labour have so fundamentally mis-managed our finances. For those with a memory, it's enough to make one weep. Can't wait for 2010 or whenever the public money runs out, which it will. I hope Labour can afford the police overtime because they're going to need it.

    Maybe the international markets will save us by simply refusing the buy the government's debt, but I doubt it. They'll put the interest rate up and bet the Tories get in to sort it all out. Their job after all is to make money, not care about our country. Whoopee.

    For the record, and before the Labour monitors cry foul, I voted for Labour and believed them when they promised prudence and better public services. They did a great job for the first 8 years. But I guess winning a third term was just too much to expect.

    For those who say, 'we've got to do something,' you don't solve a debt induced problem by making it worse. If the public finances were under control, I agree that a fiscal stimulus is absolutely the right choice. However, they aren't and we simply can't afford it, as yesterday's rose tinted figures prove. Prepare for the worst.

  • Comment number 47.

    Re 18.

    I totally agree with all you say about buy to let. it was greed driven, spurred on not only by lenders but by the press and TV programmes that showed you 'how easy it was to make a million!!!!'
    Of course 100% mortgages + was a crass idea
    Self certification let open the door to stupidity.
    Bubbles always burst we all know that!

    I also agree that stricter regulations should have been imposed on the Banking sector but you know as well as I do the that interference by the Government is always opposed by those affected,also by the media and always by opposition politicians particularly the Tories, who advocate less Government interference, more freedom in the market place.

    Countries where Governments are allowed to Govern and not bullied by the private sector will not be suffering to the extent those who have embraced free markets economies are.
    Free market, capitalism etc sadly thrives on greed and how much can I get away with.
    If that is what people of this Country want fine but if they want a civilised society personal, social, public, corporate responsibility is paramount but sadly 'man' cannot be trusted and needs regulations or at least rails to run on.

  • Comment number 48.

    I do wish Mr Peston would write in better English. That second sentence is almost unintelligible.

  • Comment number 49.

    Mortgages being squeezed is not a surprise. The issue is liquidity, and the problem is made worse by low interest rates. If customers can only secure 80% of the value of a property, rather than the 100% of a year ago, it takes time to save to achieve the level of deposit required. If interest rates fall, inevitably it takes longer to save this deposit. To get a housing market recovery quicker, we surely need to have higher interest rates on deposits, and a lower requirement by lenders for a deposit (say no more than 10%).

  • Comment number 50.

    MERVIN KING, as just said on the BBC the banks will need more money in the near future to cover future losses.

  • Comment number 51.

    I understand that the main reason for the lack of lending is related to the "setting aside" of huge sums by the lenders to pay for the enormous overcharges that they and their brokers have been charging consumers.

    According to figures produced by the UK's largest consumer representative organisation in this area, The Loancheck Foundation, these sums aggregate to a staggering £35bn.

    Interestingly, this issue has been discussed in Parliament and even been published in Hansard.

  • Comment number 52.

    Ever since we all took the notion that salaries had to be paid directly to the banks then the majority of the country, have been rightly shafted by all and sundry in that sector.

    Isn’t it about time that we all by law had the option to be paid in cash and then manage our affairs in accordance with our held net worth.

    Is society a better place or a better managed place with the banks taking our cash from source and then toying with it and us the customer?

    Would we be where we are today post the financial sector bubble if we had not been forced down that route? Indeed the bubble would not have happened.

    You don’t have to go to the LSE to know that spending money you do not have is asking for trouble, or to understand that shareholder profit above everything else will always twist management actions over and above the greater good.

    To be bailed out for this by governments who do not really have the cash to manage the situation just takes us closer to the brink of catastrophe.

  • Comment number 53.

    #8 correction

    It was Philip Hammond for the Conservatives - some of the shadows are a bit clone-like.

    Apologies for the mistake!

  • Comment number 54.

    Dear Robert,
    Yet more worrying news - I just wondered if you felt all this doom and gloom in the media was making things worse or if you feel it’s the media’s duty to tell it how it is however bad it gets.
    Reason I ask is I saw a story this morning that said you’re more trusted on the economy than Gordon Brown and David Cameron!
    “The corporation’s business editor was rated a reliable source of information by a quarter of those polled for the McCann Erickson advertising agency, compared with seven per cent for the prime minister and four per cent for the Tory leader.”
    Does the weight of responsibility ever get to you??

  • Comment number 55.


    Net New lending. Presumably you mean completions less redemptions and capital repayments - which is net lending not NEW. Picky I know, but you need to get it right. For whatever reason millions seem to hang on your every word, so please fulfil your obligations and help drive up the quality of reporting and comment.

  • Comment number 56.

    I read with wonder the comments posted here.

    Filled with partisan thoughts, self interest and misunderstanding.

    So here is my two-penneth-worth of irrational/conspiratorial thinking:

    It seems to amaze most of us that no one in the banking sector or Gov could see that any down turn in the market (here or US) would cause the collapse of our economy.
    So maybe they could - maybe for the past few years they have been desperately trying to prevent a fall, and in doing so have driven the market upwards, causing even more problems..........

    You're not telling me that no leading bank executive or Exchequer whizz kid spotted the potential for this

  • Comment number 57.

    Britons have 700bn net debt, according to your own reports, Robert. Negative net lending is the only way to get Britain out of the red.

  • Comment number 58.

    Will the last person to leave the country please switch ON the light.

    At least the energy companys wont be able to overcharge anymore.

  • Comment number 59.

    So when did records begin? I accept this will be a relatively unprecedented thing if it happens but I'm extremely doubtful of that 'never.'

  • Comment number 60.

    It is obvious we are in the midst of an economical crash. The government can't prevent the crash but it can build air bags and strengthen the system to minimise the damage. However, what they are actually doing is mad. They are telling us to drive faster, buy more plasma TVs!
    This government has not got the courage to admit it got it wrong. GB is so proud that he would rather drive the economy off a cliff and blame the US than to admit his policies were incompetent.

  • Comment number 61.


    Sometimes I wonder if you appreciate the impact the media and in particular your (the BBC) comments and speculation have on perception. As they say " perception is reality" - the confidence of the general public is based on our own experience and what we see in the media.

    In my view the problem with the housing market is relatively simple and not a mystery of the financial world.

    House prices are dropping leaving less equity to pay large stamp duty costs, mortgages are more expensive and less easy to obtain. Some have negative equity. People are worried about their jobs and increasing food and energy costs. So feel less affluent. Result: if you don't really need to move then you stay put.

    Buy to Let has major problems and is the source of a number of repossessions but those people are not necessarily losing their homes.

    First time buyers need more deposit and mortgages are not so freely available. They are also worried about jobs so are nervous about spending money. They also see house prices falling and would want to see them bottom out so will continue renting or living with parents etc.

    The people who have real problems are those who lose their jobs and cannot pay the mortgage - this is the real fear in the economy and the Government should focus on creating a simple and effective safety net and keeping the job market going as best as possible via public spending and other means.

    Re VAT decrease: human nature again... would £12.50 off a £500 TV make you go out and spend - not really. BUT - if you had been planning a purchase and there was talk weeks ago of a VAT reduction (5% was mentioned) then would you delay a purchase - yes. I suspect that on Monday 1st Dec that all the people planning significant purchases but delayed to see what happened with VAT will go out and make those purchases. Hence November 2008 figures will look bad (people delaying purchases) and December 2008 will look much better - so the Chancellor will say "look, it worked".

    The key to it all is consumer confidence. What will really make a difference? While people are genuinely concerned about losing their jobs it will be hard. If consumer confidence is low then any VAT or tax reductions will not work as people will probably save the money.

    Another thing: spin and statistics - if repossessions go from about 1.4 % to 2% then why is the headline "50% rise in repossessions" - same information, correct info but very negative headline. The number is still very low and the picture is complicated (normally hidden on page 6 or somewhere).

    The media must think about the role they play in creating perceptions and their effect on consumer confidence.

  • Comment number 62.

    Dear Robert
    OFCD, STATES --- the recession in the UK, will be the worse any where in developed countries.---

    Stand by for hell on earth.

  • Comment number 63.

    Banks must not be allowed to 'stuff' the country even further. The Chancellor needs to give them no excuses not to lend and to unblock any areas that are likely to cause a problem.

    Close (very close) monitoring of the behaviour of banks is going to have to be the norm from now on. Promised new regulation of the banking system and bankers needs to be tough, but fair and equitable - banks may find 'fair and equitable' a little difficult to understand.

    The Prime Minister and the Chancellor should be congratulated for showing strong leadership yesterday. In the House of Commons, 'Larry Lightweight' and the sixth form debating society opposite looked completely nonplussed. As the Sergeant Major said to a nervous Officer Cadet - with a strong resemblance to our 'Larry' - "I wouldn't follow you Sir, not even out of curiosity!"

    How things change...

  • Comment number 64.

    I do wonder sometimes about how people perceive this whole thing!!
    I am sure some people here, think Mr Brown and Mr Darling sat down with a mug of coffee, back of an envelope and a pencil and cobbled the thing together!!

    Sadly that is not how it works!!
    The Treasury is full of career Civil Servants, some of whom served under the last Tory Government and who will still be there after the next election.
    Then there are all the 'experts who are called in to No 11 to give their take on the problem and the solutions.
    I know of someone who was recently called to No 11 to give their advice on a vey small aspect of the whole matter.

    Then there are all those with vested interests in getting their point across too i.e banks, housebuilders etc etc.

    At the end of the day no-one knows the solution to a problem that no-one apparently saw coming, until it was too late.

    There are so many factors, so many unknown aspects both here in the Uk but also Globally that may or may not affect us in the months and years to come. No-one is capable of predicting any of it.

    What we do need is for everyone to pull together and work for each other- that would be a novelty for a start. The press & the media need to get behind the Country because there are people out there suffering as a direct result of all this and they need our help.
    All this negativity and irresponsible reporting by the media is so unhelpful because all they are doing is speculating, they know no more than the rest of us.

    Reading ones Horoscope would be about as sensible as reading some of the 'experts' predictions.

  • Comment number 65.


    Why would banks want to lend on a depreciating asset?

    Hence why the deposit requested is now rather large.

    Next Question:

    Why haven't mortgage rates come down closer to bank rates?

    Identify the banks offering the deals.

    Now consider this, who are the ones offering the closest deals to the base rate?

    These are the banks with the best capitalisation and also the banks that other banks will lend to because they are the lowest risk.

    And the expensive deals? Well, tells you all you need to know about the banks.

    And then factor in, repossession percentages increasing, prices falling, chance of unemployment, increases in the cost of insuring the loan (indemnity).

    Banks need more bad debts like a hole in the head.

    That's the reason why banks aren't offering mortgage.

    Joe Public is a credit risk.

    After all, it's not as if we borrowed 1.5tn pounds already is it?

    I also remember one BBC business pundit saying that the massive borrowing by UK consumers was nothing to worry.

    Oh really?

    It seems it is.

  • Comment number 66.

    Everyone on negative equity!!! I don't think so. I own three house, our main home, the one my parents live in, and our holiday home on the south coast - yes we are lucky.

    Am I a rich fat cat banker? No, unemployed operations specialist caught at the backend of an perverse thought that offshoring call centres is the solution to everything, and having the nerve to say it won't work and the customers won't like it.

    Through what I feel has been good financial planning, dont' borrow what you can't afford, think ahead..... I own the main house outright, so difficult to go negative on that, and if house prices drop to 30% of where they were, it might loom, but only if I want to make my mum and dad homeless or stop enjoying the sea. ( By the the way the mother in law owns hers house outright too, so she can't go negative either!)

    Smug? No

    Had negative equity in the past? - yes but we bounced back, and it is only really negative if you sell and realise the "loss".

    I know negative thoughts sell papers and boost TV ratings, but we are in danger of tlaking ourselves into more trouble than there is, and there is enough of it already.

  • Comment number 67.

    One major thing is missing from the medicine dolled out by A Darling and this is a [much overdue] reduction of Government spending on Government employees including final salary pensions and, not least, reduction of the largely wasteful Quangos which often overlap and add little to the countries wealth. Sadly, no political party seems to be concerned about the ever increasing burden of the public workforce being paid for by the ever decreasing numbers of private sector workers.

  • Comment number 68.

    # 46 bluntjeremy

    "They did a great job for the first 8 years"

    Are you joking (in an otherwise sensible post)?

    The reason we're in this unprecedented mess is really very simple. Labour did an appalling job every single day it was in power - that's precisely why the situation is so unimaginably dreadful: now we're paying for it.

  • Comment number 69.

    I was wrong. There I admit it.

    I bought my flat in April 2007, at the height of the boom, and overpaid for it. Now it is worth about 25% less, but luckily it was not a new build, so it shouldn't fall much lower. Most importantly, I do not plan to sell any time soon.

    But let me tell you what I know now that I did not know then: Yes, I was aware of buy-to-let. But I was not aware of the silly mortgages that banks were giving to justa bout anyone, people who should never have qualified in the first place, thus inflating the market beyond proportion.

    I now understand that prices were inflated so much because you had single mothers working as checkout-assistans buying 3-bed houses with a monthly payment that was more than their salary! You had unemployed people on benefits purchasing flats! And inexperienced buy-to-letters buying 7 flats at a time on spec! No offence, but how were these people expecting to make their payments? They are now blaming the banks, but they are both to blame as far as I'm concerned. Shame on all of them. Disgusting.

    Now they just default, so what for them, nothing ventured nothing gained, but it is people like me who pay the real price. People who could afford our property, who planned carefully and bought within our means, and who now are trapped in negative equity, after paying more than we should have because the people above created a bubble that they jumped out of, leaving the rest of us to suffer.

  • Comment number 70.

    No 46

    Buntjeremy save your crocodile tears. Don't blame Labour for the housing crisis. Blame the indolent and ill-informed who put
    foot on the 'housing ladder' in order to
    stand still and do nothing while they gained huge profits from our own 21st Century South Sea Bubble.

  • Comment number 71.

    Fear ROBERT-----

    The OFCD,---------- has stated that the recession in the uk, WILL be the worse of all the Idustrialised Countries,
    "Hell is on us.!"

  • Comment number 72.

    I am bored with getting angry about this and have decided to treat it all as some kind of situation comedy.

    I would have loved to cast the late, great Brian Rix as the Chancellor. He would have done the pre-budget announcement but realise halfway through he hasn't got his trousers on (just like Alistair did yesterday)!
    Richard Wilson would be Gordon Brown, delivering his classic "I don't believe it!", but with the twist that he really doesn't believe it. None of it.

    It could spawn a whole generation of immortal catch-phrases; "We must do something!" or "Don't blame me, it's the Yank Banks" might be in there, but why not adapt an old favourite and have a camp player flounce into the Cabinet budget discussion shouting "We're free!!!"?

    It's either this, or we go the other way and commission a dramatisation based on Gordon in the Berlin bunker, deploying non-existent funds to "maintain investment" while panic-striken Londoners await the arrival of the Russians. That bit would be quite realistic actually.

  • Comment number 73.

    Comment 18 : eddixon

    "Oh and one last thing - anyone spoken to a Canadian bank recently?

    The ones I have spoken to seem to be doing very nicely indeed. Why? Because they weren't allowed to get involved in trading in dodgy mortgage backed securities. So for Crash Gordon and his 'chancellor' to claim it's not their fault is rubbish. Other countries aren't having the problems we are so it is clear that with better regulation the problem would not have occurred."

    Yes, but according to Brownian logic, the Canadians actually made an incompetent decision to prohibit their banks from participating in the MBS trade. The correct real-time decision would have been to allow such participation, as the UK did. The fact that things haven't turned out as expected for us is no commentary on the quality of the decision made. The Canadians have just been lucky, that's all. By rights, we should be flying high, and they should have gone down the pan.

  • Comment number 74.

    ‘Prudence has left the building’ I heard someone say, and there was me thinking he was never in it!

  • Comment number 75.


    You're wrong, many of us saw it coming. I have the correspondence with government ministers to prove it.

    And the answer? Help the weakest individuals out just because we're a civilised country, then pour everything else into incentives for businesses to become competitive and be based here.
    Announce 125% 1st year plant allowances to stimulate business investment, same for new buildings.
    Penalise businesses offloading employment abroad with tax hits.
    Place tarfiffs on low wage imports, not to stop imports but to give domestic manufacturing half a chance.

    Unless you get business moving it's all screwed anyway. All this give-away is garbage, papering over the cracks until the balance of trade finally kills us.

  • Comment number 76.

    I wonder whether the Blairs managed to sell their two penthouse flats in Bristol before the crash?

  • Comment number 77.


    Yes, someone predicted it. Dr Nouriel Roubini, a NY economics professor. Look him up.

    For years, he was ridiculed by "free market-no regulation-trust the banks" idiots/experts.

    They nick-named him: "Dr Doom"

    Who's laughing now? Sadly, no one. Well, not true. The bankers that pocketed billions in bonuses are STILL LAUGHING.


  • Comment number 78.


    "Net new mortgage lending is likely to fall to less than zero next year"

    Sorry if this has been commented on already, but how can lending fall below zero? Logic tells me that if that happens then people will be owing money without borrowing any. That just cannot be right, now can it? Or is this a sneaky way of leaking a new sinister stragegy of the banks Hmmmmmm?

  • Comment number 79.

    #68 - not sure I agree with you, though I didn't like the lies over Iraq etc. Let's also face facts, the Tories had become tired . . .

    Anyway, I hope you can 'forgive the sinner that repenteth . . . '

  • Comment number 80.


    Pick up a copy of the yellow pages and phone a builder and tell them you would like an estimate for a 'cash' job. They will be round in no time.

    Half of them probably dont know what VAT stands for.

    The 'Black Economy' is the only one growing in the UK.

  • Comment number 81.

    The real issue is do people want to take out a new mortgage? How many mortgages are being turned down? If there isn't the demand then the only thing lenders can do is reduce mortgage rates to intice people to borrow, but if only one does it then they get swamped out. Understandable at monment they have to repair their capital base.

    Problem now is that people realise it isn't a sure bet that you will make money on property. And with lenders going back to sensible income multiples its going to be a very long time before pay increases enough to enable historic 3+1 lending to enable people to even be able to consider borrowing, unless house proces fall a long way. On new estate where I rent 3 beds cost £180k, who earns enough to be able to afford that? Average earnings max £25k, so means houses can't be worth more than £110k. House builder has written down value, so why don't they sell them at an affordable price?

    In 89 I bought a house at peak at auction, it took 7 years before house was worth same, and about 10 years before it was worth the same in real terms. Only way this problem could be quickly fixed is by a period of high inflation where pay shoots ahead to enable 3+1 ratio to increase amount people can borrow. Houseowners would be happy, but investors would loose out. At least that way there wouldn't be negative equity - Bradley Stoke near Bristol was known as "Sadly Broke" and there were Panorama programmes on problems of negative equity there.

    This is going to be a long haul and even though I have cash i wont be buying for at least 5 years.

  • Comment number 82.

    But Robert, the Government has stated that it is not shortage of demand for homes at "the right price" but a shortage of mortgages "at the right prices for people to buy"[1].

    However, is this really the truth? Especially when we consider other articles that detail how house prices will have recovered by 2013[2]. If this were the case, the average wage would have to explode to £45K p.a. to pay for the average property costing £200K, based on the following terms.

    - £20K deposit (90% LTV),
    - £180K borrowed at x4 multiple of income of £45K p.a.,
    - 25 year term.

    So we’re either looking at a real crash in house prices (not just flats and apartments) or a return to irresponsible and risky lending. This begs the question; do we believe that the Government has a real commitment to lending regulation and reform?

    I see so much contradiction that my confidence in the Government is totally shot. There just does not seem to be a coherent plan of action yet they continue to hose our money at the problem.

    I believe the Government need to state their aspiration for mortgage lending in 12 months time in terms of Loan-To-Value (LTV) ratio, multiples of annual income, and loan duration. If you agree please sign this petition:

    This would provide a better understanding of their stance towards future lending, and enable us the voting public to make our own judgment of the likelihood of lending regulation and reform.


  • Comment number 83.

    Can't wait for 2010 or whenever the public money runs out, which it will. I hope Labour can afford the police overtime because they're going to need it.

    Is this why Taser stun guns are being introduced?
    I can think of no other justifiable reason

  • Comment number 84.

    18 eddixon

    What is the point of repo of houses..

    The point is to recover the bank losses on the mortgage against the insurance policy paid for by the housholder. That is what drives repo. The only way to stop it is negative equity trading and HMG is not interested in providing a support mechanism. Repo to continue. The lower house prices drop the higher the likelyhood of negative equity and the more likely repo figures rise. It is not just repayment costs it is change in circumstances also, and the longer it goes on the more those figures are likely to rise. Negative equity locks the householder in.


    Cutting VAT by a couple of percent makes no effective difference when shops are discounting at 25 % and the pressure is deflationary. The economy will not pick up until the housing market picks up. Darling and Brown have the pedal flat to the floor heading to jump the gap. Lets hope it is not a cliff. I can see no reason for house building to suddenly pick up. I can see no reason for the City to suddenly pick up. Overly stupid lenders have been culled, overly stupid borrowers have been culled. Who is goin to rush forward to borrow which is what is needed to get the economy moving. Where is the growth going to come from, other than a very slow relaxation in spending by people who by their nature are cautious, which is why they have savings left.

    This is Darlings only shot. If there is no uplift, or it arrives late he cannot go back to the pot without discrediting himself (more?). At this stage it is far from certain that uplift will turn up in the form Darling/Brown wants. It is very difficult to see how Public Spending will not be cut in a few years time. I cannot for the life of me see why Darling/Brown has to all intents and purposes politically closed off any other route forward, it can only be desperation.

  • Comment number 85.

    You'd have thought they could have got rid of stamp duty on house purchase, that could have been introduced immediately!

  • Comment number 86.

    I worked as a mortgage advisor for Barclays up untill 3 years ago. I had only being doing the job 2 years but having studied the relavant qualifications (cemap) and learned the basic workings of the economy even I could see that this was a ticking bomb.

    First time buyers were non-existent and the only growth in the market was coming from buy to lets and second properties funded by stripping the bubble equity out of thier own homes.

    Everything coming from the banks over the last dozen years has been designed to keep this dream alive. Everything in thier eyes would be fine if prices continue to rise by 10% pa but there was never a chance that they could but were never brave enough to say this because of the brown nosing to the city that was essentail.

    First rule of economics = Every bubble bursts

    and blimey this is a monster!!

  • Comment number 87.

    The Second Great Stink:

    This report smells a bit fishy to me, given who it has come from. Sounds like they are trying to prepare the ground for some further bailing out of the banks, with the bailing out of homeowners an afterthought.

    House prices have to go down in real terms for several years as part of the necessary adjustment, which is clearly going to have to be a lot larger than it would have been if we had been sensible and not left it all to the great god of market forces. The gov't was negligent in not attempting to apply the brakes to an overheating housing market in about 2004. This could have been done by introducing new regulations to limit mortgages to 90% LTV etc but you can be sure that everyone, including the awful Tories, would have complained bitterly -- and I seem to recall that there was an election to win in 2005....

    The problems really got going just after 9/11 when the US govt told people to go out and spend spend spend, and cut interest rates way too far. As usual the UK was keenest to copy the US right or wrong.
    Prudent and well-run countries like Canada, whose banking system is favourably mentioned by #18, didn't fall for it and retained regulations and restrictions on mortgage lending. No liar's mortgages or 125% deals etc, though even there the housing market overheated in the bigger urban centres like Vancouver and Toronto and is now cooling down (well it is November.....)

    The US may be a bigger villain in all this boom and bust stuff than even the UK but they are a very big and powerful country whose $ is effectively the world's reserve currency so have a much better chance of cheating the hangman through fiscal stimulus etc. Where is the UK in comparison? Well the £ sign doesn't even work on the BBC blog - that sums it up I think!

    Guess us poor Brits will have to get through a long downturn the best we can now. Looks like it will take quite a while; we still have commercial property downturns, credit card and hire-purchase deal meltdowns to come and then there is the inexorable rise of unemployment during 2009 and 2010. There is still a lot of money around in the UK but even the people who are well off will feel poorer with all this irrational talk about house price changes etc, so won't spend it. A perfect storm and classic case of the self-fulfilling prophecy await us.

    We're going to have a long time to think about all this and should try to develop virtues such as patience, self-restraint and a modicum of self-sufficiency. And the next time we get the chance to vote for somebody listen to what Vince Cable has to say. We should lobby for Arsene Wenger to go into politics. He is truly intelligent and prudent so might make a good PM compared to Brown, Blair or Cameron. With Cable as chancellor and William Gallas at the Home Office.......

    150 years ago, the UK Parliament was on the verge of abandoning the newly built Palace of Westminster on account of the ‘Great Stink’ emanating from the River Thames: ‘a Stygian pool reeking with ineffable and unbearable horror’.

    It's time for us to abandon our faith in that stinking place again and all of its political parties. Use your noggins people: there is no such thing as a free lunch.

    We could do with a bit of govt support for public works and infrastructure though.
    The first great stink prompted parliament to approve Sir Joseph Bazalgette’s public health scheme and construction of 85 miles of brick-built sewer to Bexley, and the Crossness Pumping Station, where four of the world’s largest rotative beam engines pumped the treated sewage into a 27 million gallon reservoir, eventually to be released into the Thames.

    The thing to remember is that the politicians only acted when the smell of sewage was directly making their lives unpleasant; the rest of us Londoners had been putting up with it for centuries.

  • Comment number 88.

    #46 bluntjeremy

    Labour did not do a good job for the first 8 years. I recall they scarcely managed 8 hours, before abdicating responsibility for Monetary Policy to the Bank of England.

    An absurd decison at the time, made for changes sake, that now has come home to haunt them.

  • Comment number 89.


    Dear Sir/ Madam. I am glad that your in such a lucky postion, and maybe you should of been running the country, but the fact remains what ever your houses where worth in the heights of 2007, you can be sure they will be worth far less than that by 2010. By sum 50% at least.

    A mortgage is paid over 25 years at considerably interest. unless of course your a wealthly person. and anyone who thinks house prices are going to rise again like they have this time are quite simple living on another planet, the banks are just not going to do that again, Thats why the govt are planning to build just social housing.

  • Comment number 90.

    Just one point - We all know the Government likes to put a positive spin on ANYTHING to show us how great it is doing.

    So can someone explain this.

    With £500 billion spending (minimum - an approxiamation by their own admission) over the next 7/8 years, why haven't I heard ANYTHING about the return of monies given for the nationalisation of the banks?

    We were told that the shares would be sold at a later date (one of the many wacky promises given at the time).

    And yesterday, if I were Capt'n Darling, I would have been saying 'But wait, we might be spending £500 bn, but we expect to get back in the next whatever years this amount...'

    Strange eh?

  • Comment number 91.

    It's a Mad World

    I'm a consumer who is now supposed to spend, not because I want or need goods or services, but because my whole economic purpose is to save someone else's job.

    I'm a pensioner on a fixed income, but I'm told falling prices are a 'bad thing'. Inflation is the new saviour and we have to keep it UP. Do these people remember the 70s?

    I'm a parent, trying to help my son buy his first flat anywhere in London, looking day after day at grim shoe boxes he'd spend his whole life working to pay off. And I'm told the collapsing housing market is a bad thing and that banks should be helped to lend again, the way they did in 2007.

    I'm a taxpayer, who is supposed to take comfort from the notion that the rich will pay £2 billion more through a rise in income tax. As it's pantomime season, let me just say 'Oh no they won't!' Anyone with common sense and a decent accountant will set up a limited liability company through which to sell his or her services to an employer. Pay yourself a tiny salary, only up to the limit of personal tax relief. No PAYE or NI involved. Bung some of the money to your spouse as well, if oyu have one. Then pay yourself the balance in quarterly dividends. Now you're a small company, you'll even benefit from the Chancellor's largesse there too. The better paid will end up paying LESS not more, (as Vince Cable, as usual the only one, has articulated. Make that man PM!)

    And don't blame the better paid for doing this. Once you tip the balance between the individual and the state, so that a man goes from working for himself and paying a tithe to the government, to working for the government and being thrown whatever leftover bone his fellow citizens deem it OK for him to have, then you have broken the contract that underpins our whole system. You have placed the very people whose talents and energies we need to drive our economy OUTSIDE THE SYSTEM. You have taken away the moral basis of their commitment to it.

    The one good thing about all this is that it forces us to think again about politics. What is the purpose of government? What do we want it to do and what do we accept that we have to do for ourselves? What should the relationship be between the state and the individual family? Maybe we will stop believing politicians' promises that they can solve all our problems and realise that their promises must all be paid for by us. Maybe we will finally grow up and realise that any society can only be as civilised as it can afford to be. That we were never really as rich as we thought we were. All we were doing these last ten years was spending our future.

    Not that anyone is debating any of this or asking what moral principles should lie behind decisions on taxation. Oh no, it's all about panic and the need keep the system working just long enough to win an election in 18 months time.

  • Comment number 92.

    Dear Robert,
    Oh how the constant barrage of blame beats through the heart of Britain. Its the lenders fault, the estate agents, Gordon Brown and new Labour. Actually, just about all of us are to blame. Oh yes banks chose to lend us too much, but the British also chose to borrow too much, shop too much, eat too much, drink too much and for too long forgot to settle the bill! Now we are here there are some, mainly Conservative politicians, that claim that had they been in power this wouldn't have happened, an impossible claim to prove of course, but these same politicians are just about the only ones in the G20 not up for the kind of stimulus package anmnounced yesterday.
    The British have had their confidence knocked, a recession/depression is a little like a war and requires that all political parties show some unity, which will also help the British public, in return, to feel more confident. I am no fan of Brown and Darling, but at least they have the guts to do the necessary, even if it appears a little suicidal politically and risky economically.
    Incidentally, I spoke with the owners of several small retailers this morning who roundly welcomed the changes in VAT. Granted, yesterdays package may well not work, neither perhaps will Obama's future plans or those of any of the major economies, including the Chinese. The British I suspect have little interest in whether New Labour is moving towards the left and the Tories to the right, what they are interested in is how they can pay the rent, the mortgage, the gas and the council tax in the coming months, how they will be able to feed and dress their children and themselves. What was abundantly clear during yesterdays PBR in parliament was the amount of laughter coming from the Tory benches as Darling delivered his speech. I don't hear the people of Britain laughing about this, any of it, its no laughing matter after all!

  • Comment number 93.

    Well we are on a downward trend we are told ???

    Several people have mentioned things that have proved to be too good to be true. Returns on buy to let, house price increases, why even rising share prices.....

    Now all the pundits are trying to get us to invest in "safe" government bonds. These are just bits of paper saying I will pay you if I have the money...... The Icelandic government went bust or very nearly didn't it ?

    Money under the matress (or in Barclays or a proper Building Society) might be better I think !!!!!

  • Comment number 94.


    A moratorium on repossessions and foreclosures!


  • Comment number 95.

    The people who are predicting catastrophic falls in house prices are forgetting one thing. A house is more than a financial vehicle it is also a place of residence.

    The sad fact of the matter is that due to a lack of socila cohesion there continues to exist demand for homes that outstrips supply and hence at a fundamental economic level there exists good reasons for high house prices particularly in areas of strong economic activity.

  • Comment number 96.

    moraymint @ 34

    Excellent posts (I looked at some of your 'previous').

    I agree with your sentiments, there is now a massive deleveraging taking place, which will be extremely painful.

    Ultimately, I blame ourselves.

    We elect these politicians, they make bad policy e.g. a credit-fuelled property bubble, and in parallel, are nearly always afraid to tell us the truth ... because generally we do not want to hear it.

    In the end, you get the politicians you deserve.

    That is it from me ... see you all on the other side.

  • Comment number 97.

    Net new mortgage lending negative? Does that mean we are lending to them?

    73 Excellence: Irony?

  • Comment number 98.

    Bankers could and should revert to selling or financing low energy Dutch tulip bulbs

    Bankers will wait till housing prices halve ,wages will fall and accumulated debt will start to look like a mountain of unscaleable horror for many .

  • Comment number 99.

    96 John:

    Thanks for link posted the other day (Crash Course), I enjoyed that, cheers.

  • Comment number 100.

    Let's get this right: the credit crunch was caused by people unable to pay off their mortgages.

    Now you are saying that if people do decide to pay off their mortgages it will have a disastrous effect on house prices, and everyone will be thrown into negative equity.

    What kind of Mickey Mouse economy are we running here?

    It ultimately all comes down to fractional reserve banking and the inevitable collapse of a system built on usury and credit.

    No amount of huffing and puffing by Brown and Darling can change that.

    Now I understand why Jacqui Smith is rushing to arm all our police with torture weapons, sorry tasers. They will need them to prevent a mass revolt against the government and the bankers.


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