A glimpse of hope on the personal credit front?

January 27th, 2009 by admin | Filed under Daily News, Recession, Retail, UK Bank Accounts, UK Banks, UK Credit Cards, UK employment.

If you can compare the current global financial crisis to a giant tidal wave carrying all before it, then it might be encouraging to take note that in the tail drift, tiny glimmers of hope are beginning to rise above the surface of the calmer waters while no one was looking. Financial experts ( what would we do without them) are blithely predicting that the World’s leading financial institutions are yet to lose the other half of their asset value, and until they do, the real financial recovery cannot begin to take place.

However there the first signs of a minor recovery in consumer spending among those who have realized that we are in the beginning of the biggest buyers market of all time, and there are bargains to be had, especially in the property market.

Figures issued yesterday showed that mortgage approvals in December 2008 jumped by 27 per cent from the previous month (22,051 from 17,339). This upturn in the property sales, mostly in the second hand sector, is being regarded as a cautious step in the right direction, although November 2008 approvals were among the lowest in recent history. In the “boom years” of the property market, e banks were handing out 80,000 mortgages in an average month, with almost a 100% approval rate. In other words, you turned up at your bank, you asked for a mortgage and you got it. In today’s uncertain climate, the approval rates are much lower, although the banks seem reluctant to release specific figures.

Figures released yesterday also showed that re-mortgage approvals were on the up by just a few hundred in December, along with increased activity in the buy-to-let and equity release mortgages sector of the property market.

These figures show a level of cautious optimism against the backdrop of what was a horrendous year for the UK mortgage industry. Total lending for 2008 came to £170 billion, down almost 25 per cent from the previous year, with the number of loans approved for house purchase down by more than fifty per cent.

In the US, slightly against expectations, house sales were also on the rise in December, a sure sign that buyers were taking advantage of the serious reduction in the prices of property caused by the credit crunch.

Sales of second hand properties rose by 6.5% in the month. Bearing in mind that December is usually one of the weakest months of the year for property transactions, this upturn shows that a gradual recovery may be beginning to get under way in the United States.

Second hand property prices fell by 15.3% in December from the previous years. One disturbing note to this optimism is that almost half of transactions that took place in December fell into the category of “distress sales”, where the seller needed to dispose of their property under pressure and was forced to reduce the price considerably.

Experts are now waiting till spring to see if this trend will continue, especially in the second hand market.

Other signs that the UK consumer is increasingly taking their share of responsibility in getting the country out of its largely self imposed mess are that the collective balance due on credit card debt in December 2008 fell by £218 million while outstanding balances on overdrafts and bank loans fell by £135 million in the same month.