New Year Recession Fears

Insurance blog thought the silly season was in the Summer, but from the noises coming out of Whitehall and what remains of Fleet St. recently, it looks like it’s begun early!

If all the Economic pundits are to be believed, you would think that the economy was rosy! No chance of a the dreaded double dip recession now ……..

Hmm, what about the 600,000 job losses in the public sector that still have to be made this spring and will have to be paid for out of a shrinking GDP, rising wage demands from the private sector, fuels costs going through the roof and VAT at it’s highest ever 20%!

However you look at the current situation the immediate future does not look too bright!

Amongst all the coalition division and noise about quangos, cuts, student fees, interest rates and inflation, the UK Government has this week raised Insurance premium tax to 6%. With the cost of Insurance already at record highs as companies try to build up lost claims reserves, maybe they thought we’d not notice more indirect taxation!

The future doesn’t look too orange for Corporal Clegg and his Liberal lackies either who are currently enjoying their lowest popularity level for 30 years.

Meanwhile David Cameron is making noises about the housing sector while failing to enforce the necessary lending from the banks that would inject some momentum into a recovery, he has spoken out about plans to clamp down even further on mortgages in the name of responsible lending.

Tory Housing minister Grant Shapps has said that under the new  FSA’s Mortgage Market Review (MMR) proposals, he himself would have failed to get a mortgage.

Now Cameron has said that lenders have already gone too far in preventing ‘good risk’ buyers from getting mortgages.

The Prime Minister warned that the housing market was ‘stuck’ and would not improve until banks and building societies got back to ‘respectable’ lending.  Cameron said the reaction to the crash had now gone too far.

He said: “The pendulum has now swung too far the other way. If you are a single person, you are earning a decent salary, you go to the bank or building society, you are actually quite a good risk, they won’t give you 80% of the value, they won’t give you four times your salary.

“So we are working with them to try and say, of course we don’t want to see the unsustainable boom of the past, but we’ve got to get proper lending, respectable lending, going again.”

Cameron made it clear that he did not want to see a return to 120% mortgages and loans based on seven or eight times earnings.

He said: “We don’t want another housing boom where prices rise out of people’s reach, but the housing market is a key part of the economy. You need a housing market where people are able to sell and people are able to buy.”

Yeah and one where banks lend money! It wasn’t irresponsible lending to UK homeowners that caused the current recession, if this was the case then repossessions would not be at the levels they are! Moreover bad banking and buying toxic debt from the USA were the root cause. With the same people in control, these banks must be forced to lend to both homeowners and businesses alike if we are to see any real recovery in the housing and employment markets in the UK in 2011.