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Repossessions are picking up. They jumped by 20% last year, compared to 2006.
But here’s the good news. There were still fewer repossessions than the Council of Mortgage Lenders (who reported the data) had expected, at 27,100 compared to a forecast of 30,000 for the whole of 2007.
And better news yet. That number, 27,000, is still far fewer than the 75,500 households who were kicked out of their homes at the height of the last recession, in 1991.
And if you think all this ‘good news’ sounds exactly like someone clutching desperately at straws, then you’d be absolutely right…
Repossessions actually came in lower than the Council for Mortgage Lenders had initially predicted, which had many estate agents trying to look on the bright side. But a 27,100 turnout against a forecast for 30,000 is a pretty good prediction by anyone’s standards (and downright miraculous by those of economists’), so there’s not much comfort to be gleaned from that.
Why repossessions could hit 60,000
In October, the CML said that this year repossessions could hit 45,000, but it’s been reluctant to update that forecast. But mortgage broker John Charcol suggested to The Telegraph’s Emma Thelwell that there could be as many as 60,000 repossessions. That’s suddenly not very far off the fabled 75,000 or so we saw in the early 1990s, and more than double this year’s.
The really worrying thing is that this particular batch of repossessions doesn’t actually include the knock-on effects from the credit crunch. Yes, the figures include the last half of 2007. But bear in mind that a repossession takes time to go through. We’re essentially looking at 27,000 repossessions for a time period when lending was still lax, and interest rates were pretty low.
We’re now heading into a period where rates charged on mortgages are rising (there are still hundreds of thousands of people to come off fixed-rate mortgages, many of whom will struggle to find decent replacement deals if they are even remotely un-creditworthy). House prices are also falling, which will make it harder for people to remortgage as the amount of equity in their home drops.
That 60,000 forecast from Charcol suddenly looks very plausible indeed.
It’s interesting to see that against this backdrop, Northern Rock is still writing its ‘Together’ mortgages, which allow anyone buying a property to borrow 125% of its value, plunging them deep into negative equity at a time when house prices are falling. Good to see that the government and you and I, the taxpayer, are propping up a company with such a far-sighted approach to lending, isn’t it?
Why the rising gold price is a headache for G7
Just before we go – my colleague Dominic Frisby wrote the other day about whether the gold price is being manipulated or not. I note that one of the key decisions of the G7 meeting at the weekend was to allow the International Monetary Fund to sell some of its $92bn in gold reserves.
Now maybe the IMF just needs the money – and with gold at record levels, it’s a pretty good time to raise the cash. But given that the IMF is pretty much the lender of last resort for the entire global economy, you’d think that, particularly at a time like this, it should really be holding onto its gold instead of swapping it for ever-depreciating fiat money.
Right now everyone in the G7 wants to cut interest rates with impunity. But the gold price is probably the best and most visible indicator of just how nervous everyone is about rising inflation and rampant currency destruction, and right now it’s screaming red alert. So it’d be nice for the G7 if the yellow metal would just shut up, frankly.
Flogging off a load of the IMF’s gold reserves probably seems like the best way to do it. So is this bad news for gold? Not really. As the team at the Gold Anti-Trust Action Committee (Gata) point out, “for almost a decade now central bank gold sales have been accompanied by higher gold prices, not lower,” as the Bank of England can well attest. And if the G7 is looking to the IMF to sell, then it’s reasonable to suggest that perhaps their own central banks have now sold as much they want – or are able – to. In any case, the US would need to approve such sales, and has in the past opposed them.
So what should you do if the IMF does decide to sell? I imagine it’ll be a good buying opportunity for the rest of us.
Turning to the wider markets…
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Rising commodities prices boost miners
Elsewhere in Europe, the Paris CAC-40 ended the day 14 points lower at 4,709, as financials including Credit Agricole and SocGen weighed. Over in Frankfurt, the DAX-30 was down 33 points, at 6,767.
On Wall Street, soaring commodities prices (the ECB index hit a record high on Friday) prompted concerns over spiralling inflation. The Dow Jones fell 64 points to end the day at 12,182. The S&P 500 was 5 points lower, at 1,331. The tech-heavy was the only index which ended the day in positive territory, gaining 11 points to end the day at 1,331.
In Asia, the Japanese Nikkei
fell 189 points to 13,017. And in Hong Kong, the Hang Seng was down 853 points to 22,616.
Pound falls ahead of inflation data
Crude oil
futures ro
se by nearly $4 to $91.77 on Friday, but had dipped to $91.35 this morning. In London, Brent spot was at $91.95 a barrel.
Spot gold had risen to $921.50 this morning. Platinum had hit a new record high of $1,887. And silver was at $17.18.
In the currency market,
the pound had fallen to 1.9462 against the dollar and 1.3359 against the euro, as investors await a slew of UK economic data to be announced this week. And the dollar was at 0.6864 against the euro and 106.35 against the Japanese yen.
And in London this morning, radio company GCap Media announed this morning that it is to close radio stations including ‘the Jazz’ and sell off its digital network operator DigitalOne in order to concentrate on key brands that generate higher revenues. The moves to bolster earnings follow a rejected bid by Global Radio Holdings.
Our recommended articles for today…
Why the ECB should keep rates on hold
– Investors are beginning to shun the eurozone, and for good reason. But even so, the case for a base rate cut across the region has yet to be made. For more from Jeremy Batstone on the problems currently facing Europe’s monetary policymakers, read: Why the ECB should keep rates on hold
Power cuts mean opportunities for investors
– South Africa’s problem electricity supply may have been making the headlines lately, but it’s not the only place suffering from regular power cuts. Merryn Somerset Webb looks at why power supply problems could affect growth in countries such as China – and the firms that may benefit from a spate of work – here: Power cuts mean opportunities for investors