MPC Treasury Services

Is an independent company specialising in money broking, treasury consultancy projects and training programs. The company is managed by a team who have a wealth of experience in financial risk management.

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Off The Floor

02 / Nov / 2008

Last weeks’ figures came in much as expected and suggested that we have reached the bottom as far as the housing market is concerned. Mortgage approvals actually rose in September – by 1000, from 32,000 to 33,000. Hardly the “green shoots of recovery” but at least the downward spiral has ceased. More amazingly net mortgage lending shot up to £2.167bln, analysts had been expecting £1bln. However this is still 20% of last September’s figure. It now looks as if the Government’s plan and arm-twisting is bearing fruit but advances are still restricted to low loan-to-value applications. The numbers though for consumer credit were dire, advancing by only £251million. This is lowest level since early 1994 and will give rise to great concern to retailers in the run up to the key Christmas trading period.

There is little in the way of fresh figures this week; Septembers manufacturing output and industrial production numbers are released on Wednesday. Both are expected to show annual declines in the face of declining demand both domestically and globally. Analysts are predicting falls of 2.3% and 1.7% respectively. The big news though comes on Thursday with the Banks Base Rate decision. Base Rate will be cut; the only question is by how much. The consensus now is for a half percent, bringing Base to 4.00% but there is a large minority of pundits who believe a full 1% is on the cards. The thinking behind the full 1 % theory is that a big bold move now will have a greater psychological impact than a series of small reductions. The timing is also important. The “High Street” needs a shot in the arm ahead of Christmas trading and a significant Rate cut now would be a big help. A cut in December may be too late and cuts in the near year would do little to stimulate extra spending in the sales season. Where will it end? At first glance those predicting Base Rate at 1% in November 2009 look unbalanced but with fiscal policy unable to take much more of the strain this could be a real possibility.