Short term Sterling Recovery?
Sterling firmed up throughout yesterday’s trading against the Euro and the US Dollar following support from Quarter 4 (year on year) figures for Total Business Investment, which measures the total amount of capital expenditures made by private firms. A large business investment is indicative of overall growth and demand in the UK economy. The figures were expected to come out at an increase of 1.7% and ended up coming in at 5.3% a huge difference. Sterling suddenly made gains of over a cent against the US Dollar and the Euro. Further, the CBI (Confederation of British Industry) said its trade survey reported sales balances rose to +1 in March from -3 in February, which exceeded expectations for a -5 reading. Another reason why GBP gained against most of the major currencies yesterday morning.
UK Housing Market
However, the looming threat of UK interest rate cuts has not yet disappeared. Recent statistics released from the British banker’s Association confirmed a continuing downturn in the property market. Banks lent 43,870 mortgages in February down 33% on last year. Banks are finding it difficult to raise funds on the financial markets owing to the credit crunch and therefore have been tightening up their lending criteria. According to Simon Rubinsohn, chief economist at the Royal Institute of Chartered Surveyors (RICS) ‘buyer enquiries have slipped back to the lows seen in the wake of the Northern Rock crisis and this trend is likely to persist through the spring.’
Credit Crunch Problems
Banks have so far written down their assets by more than more than $125bn due to problems related to the US sub-prime collapse, but the scale of the problem is believed to be much worse. The reluctance of banks to lend to each other because of the fear of potential bad debts was highlighted again yesterday as UK banks tried to borrow more than three times the amount on offer in the Bank of England's weekly auction.
Between them the banks asked for £38bn, but only £13.6bn was made available. Last week the banks asked for £30bn but only got £11bn. With the UK banks now feeling the crunch even more than previously thought this could further damage the Pound.
Following their recent meeting Gordon Brown and French president Nicholas Sarkozy urged that banks hit by the credit crunch should disclose the full extent of their losses, ‘We agreed the need for greater transparency in financial markets to ensure banks make full and prompt disclosure of the scale of write-offs,’ Brown and Sarkozy said in a joint statement following two days of talks.
Indeed, when Northern Rock originally announced problems with the credit limits in September we have seen the Pound devalue by approximately 14% which on a €200,000 property purchase makes a difference of approximately £19,000.
Many people have been waiting anxiously for Sterling to recover but with very little on the horizon to strengthen our Great British Pound it may prove to be beneficial to move sooner rather than later before that dream of owning a property abroad becomes a nightmare.
And finally...
New figures show that families are about £7 a week worse off than they were a year ago as hikes in the cost of living continue to eat into their income. Households earned around £17 per week more before tax during February than they did the year before but this increase was more than offset by a £24 jump in the weekly cost of essentials such as food, transport and fuel. So if you’re fed up with an ever increasing cost of living in the UK and want to see how far your money will stretch abroad why not take a look at http://www.propertyline.co.uk/ one of the fastest growing overseas property portals to find your dream home.
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