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Buy-to-let lending continues to increase after a severe decline in the first half of 2009, new figures show.

While new lending rose for the second consecutive quarter in the last three months of 2009 – with 25,800 new loans in Q4 compared to Q3’s 23,700. These figures are well below thw historical average level and still very low. 

Michael Coogan, director general of the Council of Mortgage Lenders (CML), which produced the figures, said this was ‘below the level of activity which is needed to enhance a vibrant private rental sector in the UK’.

The Times reported that ‘Sterling fell sharply against the dollar and the euro as the Bank of England hinted that it could pump billions more into the economy via quantitative easing. The Bank’s Monetary Policy Committee (MPC) voted to halt quantitative easing this month, but Mervyn King, the Bank Governor, said that it was “too soon” to say that no more asset purchases would be needed.’

‘The Bank also struck a downbeat note on the economy’s outlook in its Quarterly Inflation Report, revising down its growth forecasts for this year. Mr King refused to rule out a double-dip recession, saying that a quarter of negative growth was possible, but he added that it was just as likely that the economy could have four quarters of “rapid” growth.’

See  http://business.timesonline.co.uk/tol/business/economics/article7022632.ece#cid=OTC-RSS&attr=1185799 for the full story

The Bank of England has decided not to extend its quantitative easing programme at the moment but left the door open for future asset buying if needed, city wire reported today.

In a statement, the bank’s monetary policy committee said: ’The committee will continue to monitor the appropriate scale of the asset purchase programme and further purchases would be made should the outlook warrant them.’ But for now, members believe there are signs the economy is pulling out of recession and more stimulus is not needed.

see www.citywire.co.uk for the full report

Gross Domestic Product (GDP) increased by 0.1% in the fourth quarter of 2009, compared with a decrease of 0.2% in the third quarter. The rise in output was due to growths in services and production.

This weaker than expected growth brings the UK economy out of recession. The economy had previously contracted for six consecutive quarters - the longest period since quarterly figures were first recorded in 1955.

The UK has been the last major economy still in recession.

The number of homebuyer mortgages approved by banks rose to a two-year high in December, but a continuing lack of remortgaging activity helped keep total lending down.

The figures from the British Bankers Association (BBA) showed 45,897 loans were approved for house purchases during the month, slightly more than double the number approved in December 2008. However, the number of remortgages dropped by 63.3% year-on-year to 23,480. This was mainly due to specialist lenders largely withdrawing from the market and building society finance contracting.

Over the whole of the year, the BBA said its members had approved a total of 980,000 home loans, the lowest figure since records began in 1997 and 27% lower than in 2008.

UK inflation rose at its fastest annual pace for nine months in December.

The Office for National Statistics said the Consumer Price Index (CPI) measure of inflation had risen to 2.9%, up from an annual rate of 1.9% in November. That was the biggest jump in the annual rate from one month to the next since records began, and exceeded the City’s expectations of an increase to 2.6%.

The annual increase in CPI mainly came about because of a number of unusual factors that had depressed prices a year earlier. These included a near-record fall in oil prices in December 2008, the VAT cut to 15% and retail discounting, the Office for National Statistics said.

Core CPI, which excludes food, energy, tobacco and alcohol, rose by 2.8% on the year, which is the fastest pace of growth since records began in January 1997.

Invesco Perpetual’s Neil Woodford has warned that there is a very real chance that gilts could lose their AAA-rating as a result of the mounting fiscal deficit in the UK.

Citywire told how Woodford stated “There is a relatively high probability at least of it…There is a decent chance that we will be downgraded. It is a near certainty if we don’t at the next election properly deal with the deficit. If we don’t take the medicine we will be downgraded. If we do then we might avoid a downgrade.”

He also reiterated his view that despite mounting good economic news the recovery will be a slow and painful one, characterised by a series of economic disappointments. Indeed the economic news of the past quarter has not persuaded him that a V-shaped recovery is under way. He still believes there is a possibility of a couple of quarters of negative growth as banks, consumers and governments are forced to de-leverage much further.

See www.citywire.co.uk for the full story

According to a recent report the interest rates on fixed rate mortgages have started to come back down again after hitting an eight year high in June of this year. Since hitting the almost decade long high, interest rates on fixed rate mortgages have come back down for the month of July according to recently released figures. (more…)

The Halifax is about to cut rates on its fixed and tracker rate mortgages by up to 0.4% (more…)