Maybe the only surprise in that data is that it was even worse two years ago.

And yet, look at remortgages, and the market is still quite brisk. In September the value of remortgages was £12.9 billion, a little above the six-month average.

As for consumer credit, September saw the highest growth rate in two years.

Total debt, by the way, is now running at £1.379 trillion. Funny, it only seems like five minutes ago when debt broke through the £1 trillion mark. The National Institute of Economics and Social Research now estimates that debt-to-income in the household sector is now 1.66, the highest ratio ever recorded by the Office for National Statistics.

But, take a step back, and we see a different picture emerge. Mortgages for house purchase are falling, but borrowing for other purposes is still rising. It’s this borrowing that is helping to prop up the economy.

The Council of Mortgage Lenders (CML) also revealed a new report yesterday. It released its latest projections. It reckons house prices will rise by 7 per cent this year and 1 per cent next. But the real headline making predictions relates to affordable debt.

CML reckons the number of repossessions taken by first-charge mortgage lenders will rise from 22,700 last year to 30,000 this year, and to 45,000 in 2008. This will be the highest level of repossessions since the mid-1990s.

But don’t panic yet. To put the CML projections on repossessions into context, back in the early 1990s, repossessions went close to 80,000 in a year, and were higher than the level predicted for the following year for four years in succession.

There is a snag with these projections, however. Analysts often seem to ignore the ability of borrowers to borrow more money to pay off debt. Surely one of the reasons why rates of top-up mortgages are so high is because consumers need the money to be able to pay off debt. They are borrowing to fund borrowing.

There is a real danger that in the months ahead, the combination of tighter credit and lower house price inflation will remove the option of being able to borrow to pay off borrowings. This danger has, in our view, been underestimated by most economists.

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31 October 2007

Leeds Building Society has unveiled a range of fixed-rate tax-free Isa deals.

The company said the products provide an excellent guaranteed return and flexibility of access to some of the funds, without notice or penalty at any time, over a period which suits each individual customer’s needs.

The minimum investment is just £1, and the company claims this means the products are available to all savers.

Customers can earn 6.10 per cent AER fixed for three years, 5.70 per cent AER fixed for two years and 5.60 per cent AER fixed for one year.

Leeds Building Society, head of marketing and PR, Karen Wint said: “These products offer a high fixed interest rate combined with access to funds.

“All three versions are straightforward accounts with no short-term headline bonus rates, other catches or requirements to open linked accounts.

“The low minimum investment makes these accounts attractive.

“Customers can also transfer their existing Isa balances plus any interest and benefit from the excellent features. Tessa Only Isa customers can invest up to £9,000 in capital, plus interest already earned.”

31 October 2007

An internet firm has launched a new site will allows people looking for loans to specify how much they want to borrow – and how much they are willing to pay.

Zopa already enables people to borrow or lend money to each other in an effort to side-step the high street banks.

But the group has now extended its service to let people pitch for the loan they want through its Zopa Listings service.

Surfers will be able to give details of how much they want to borrow, what they want the money for, what interest rate they want to pay and how long it will take them to pay back the cash.

The company will vet all potential borrowers to ensure they are credit-worthy and have good repayment histories.

People who borrow through the service will pay 0.5 per cent of the value of their loan to Zopa per annum, while lenders will pay 0.5 per cent of the amount they have lent.

Zopa UK, managing director, Giles Andrews said: “The launch of Zopa Listings is an exciting new avenue for our members, bringing new levels of individuality and personal control to social lending.

“Would-be borrowers will be able to make a very personalised request to our lenders for the money they are seeking, including photos and in the near future even videos.”

31 October 2007

The pound has broken a 26-year-old record against the dollar as interest rate hopes on both sides of the Atlantic pushed the currency higher.

Sterling reached more than 2.06 US dollars as economists forecast a further reduction in rates in the US.

CMC Markets, currency expert, James Hughes said: “We’ll probably see the pound test these levels a few times ahead of the interest rate decision.

“Potential strength on the decision depends if a cut has already been fully factored in, but I don’t think it has yet.”

Back on November 5, 1980, the pound hit 2.446 dollars, before which the highest levels seen were in the early 1970s, when it reached 2.644 dollars.

But Mr Hughes said it is possible the sterling could break through the level seen in the 1980s, given the current fears over the US economy.

The news is good for investors looking to buy businesses or property in the US, although exporting firms are feeling the pinch.

Meanwhile in the UK, previous hopes that rates will be cut as early as November have been scaled back after inflation and economic growth figures provided little compelling evidence for a reduction.

31 October 2007

Mortgage brokers are feeling more positive about the prospects of a cut in the Bank of England base rate in the coming months, new research shows.

Almost 90 per cent of brokers in the UK now believe that interest rates have peaked, with 43 per cent claiming that they believe that rates will fall as soon as February.

The study by GE Money Home Lending indicates this optimism is having an impact on the advice brokers give consumers, with discounted and tracker rates beginning to increase in popularity.

Fixed rates accounted for almost three quarters of all mortgage products being recommended by brokers since August this year.

But the number of brokers planning on advising discount and tracker products in the next three months has risen by 120 per cent, while fixed rates – although still accounting for the majority of sales – are expected to fall by a third.

GE Money Home Lending, head of mortgage marketing, Gerry Bell said: “Our latest research shows an element of growing confidence from brokers, with nine out of 10 believing that interest rates have already peaked at their highest level.

“At the same time the research has found that almost half of consumers (43 per cent) are worried about securing a good mortgage or a re-mortgage due to the recent credit crunch.

“It is therefore crucially important that lenders continue to work closely with brokers to understand their customers’ needs and concerns, ensuring we are providing a range of affordable products options which will allow them to make informed choices in the current environment.”