The announcement finally came that the UK is now officially in recession and has been so since July 2008. GDP fell 0.6% between July and September and a further 1.5% in the final quarter, thus meeting the technical definition of a recession.

The news is no surprise and it isn’t really a question whether we’re in a recession but how long we’ll be in a recession for?

Gordon Brown has admitted that the downturn in the world economy is likely to send the UK into recession. Adding that the crisis in the global financial markets would cause “recession in America, France, Italy, Germany, Japan and - because no country can insulate itself from it - Britain too”. (more…)

News that banks are looking to further tighten their lending criteria and the ever reducing number of new mortgage approvals raises hopes that the Bank of England will cut interest rates. (more…)

The proposed $700m bail out of the US Economy and Wall Street put forward by George Bush is stalling as legislators are worried about the cost and the governments level of involvement in the financial sector. However Bush remains optimistic that plans will be passed as Congress have vowed to stay in session until a deal is done.

The stalling created nervousness on this side of the pond and sent the FTSE down 109 points (2%) to 5,088. The bad news was compounded by Banks announcing that mortgage rates were on the increase again as liquidity in the market remains non-existent.

As expected, the Bank of England’s Monetary Policy Committee have kept interest rates on hold at 5%. With inflation at 3.3% against a target of 2% this was the only decision the MPC were likely to take, despite incresing economic concerns and fears that the UK could be entering a recession. If there are further signs of a downturn, the Bank must be prepared to act quickly and cut rates.

The FTSE ended the week at 5,529.90 taking the fall for the first half of the year to 14.4%, the worst performance of the index since 1994 when it fell 14.6%. The continued sell-off of stocks came as oil hit $142.69 a barrel, news which reverberated around world markets. Analysts had initially predicted a poor start to the year, but with better prospects for the second half of 2008, however this optimism is waning and so it could be a bumpy ride all the way in to 2009.

The Bradford & Bingley, Co-operative bank and First Direct have today raised the cost of their fixed rate mortgages as Banks find it increasingly difficult to raise finance to fund mortgage deals. The Co-op saw the biggest rise as they increased their rates between 0.7% and 0.9%. The move by these three banks now takes the average cost of a fixed rate mortgage to over 7%. (more…)