The fall resulted in a 7.6 percent drop in the annual rate of net lending, which has been driven to its lowest level in a decade.

The figures in the Trends in Lending report showed that for the month of October there was a fall in lending by UK banks to businesses of £4.8 billion, and this was slightly higher than the fall that was seen in the previous month, which stood at £4.6 billion.

The Shadow Chancellor, George Osborne, said that the figures showed that many businesses were still in the throes of a credit crunch, and that the measures and steps that had been taken by the Labour government clearly hadn’t had the desired effect because businesses were clearly still struggling to get the credit that they needed from the UK’s banks.

Economist, Vicky Redwood, said that it was likely that in the near future lending to businesses would remain subdued, and that there was doubt that there would be any significant pick up in bank lending over the course of next year. She added that for the foreseeable future credit conditions would remain restricted in the UK, and that amongst the groups that would be most affected would be consumers and smaller businesses.

Following the release of the report George Osborne stated: “The continuing decline in credit to business… revealed today shows that all those Government recession schemes have failed and the credit crunch continues for many smaller businesses.”

Fall in lending to businesses according to central bank is a post from: Glitec Loans

The group added that many of these consumers were keen to take advantage of the fact that the base interest rate is still at its lowest level ever, and in order to secure a good deal were willing to tie themselves in for longer.

The report also claimed that two year fixed rate products and tracker mortgages have become increasingly unpopular in the current economic climate, partly as a result of the ongoing recession.

One official from the group stated: “Two year fixes were always the favourite, or trackers when Bank Rate is widely expected to fall, but this rush to commit long term shows that consumer attitude has turned a corner.”

The group said that it was likely that most consumers thought that over the next year or two the base interest rate will start to go up again, and the current low rate deals that are currently on offer from many lenders will disappear from the shelves. Many are therefore keen to get themselves on to these competitive rates as soon as possible, even if it means tying themselves in for a longer period.

Whilst longer term products are more costly than the shorter term ones, this doesn’t seem to be putting consumers off, according to group officials.

The group official went on to state: “It seems borrowers are willing to pay marginally more for a recession buffer that will tide them over for as long as possible.”

Consumers looking for mortgages over longer terms is a post from: Glitec Loans

The plan involves ploughing between £75 billion and £150 billion back into the economy through the purchase of assets such as government and corporate bonds, and this is something that the government has decided to focus on in place of continued cuts in interest rates, which have already fallen to all time lows of just 0.5 percent.

A poll of economist showed that many thought that the quantitative easing programme would help to bring the country out of recession, even though it could be a slow process. Economists have also predicted that the government can no longer look at reducing interest rates further in order to ease pressure, because the base rate is already at such a low level, and quantitative easing will provide an effective alternative solution to trying the get the economy back on its feet.

Nearly all of the forty nine economists that were polled about the potential success of quantitative easing said that they thought it would prove to be successful.

One economist said: “Ultimately, we feel that QE will be effective. That is because we believe that the BoE will conduct QE, issuing more central bank money, until it becomes effective.”

Most also agreed that the Bank of England could not reduce interest rates any further in order to tackle the economic problems, with the majority predicting that the base rate would now remain static for the rest of this year and into the next year.

One economist stated: “Official rates are about as low as they can go. No further monetary policy action looks to be on the cards for a while longer.”

Quantitative easing will prove successful is a post from: Glitec Loans

One of the effects of this problem is that property sales have been tumbling over the past year, with many estate agents going out of business as a result of being unable to sell properties to people that cannot afford them and cannot get the finance that they need.

Officials from the Royal Institute of Chartered Surveyors have recently said that February was another bad month for property sales, with sales levels sinking once again, and this showed that whilst some estate agents had reported renewed interest from would be buyers the interest was still not converting into sales even though property prices were continuing to fall.

RICS said that whilst many people are trying to get their hands on a property now that prices are around 20 percent lower than a year ago many simply cannot get a mortgage in the current financial climate.

RICS said that lenders are reluctant to offer mortgage to those without a fairly sizeable deposit, and this means that many first time buyers, who used to keep the market buoyant, are now out of the running when it comes to taking out a mortgage and buying a property. Also, uncertainty over the economy and job security is putting many people off from taking the plunge and purchasing a property.

An official from RICS said: ‘Potential buyers continue to come through estate agency doors but without mortgage finance transaction levels are likely to remain close to all-time lows. Worryingly, the lengthy process of obtaining mortgage finance, even for those with large deposits, is contributing towards the blockage in the market place. Family homes remain in demand but flats are proving harder to sell in many areas as first-time buyers are struggling to gain a foothold on the property ladder.’

Property sales sink again in February, states RICS is a post from: Glitec Loans

One of the areas to suffer most was the mortgage sector, with the number of mortgage deals on the market plunging and the number of borrowers able to get their hands on an affordable mortgage plummeting.

The effects of the global credit crunch and high interbank lending charged led to a logjam in the financial sector, and this meant that for many banks and lender mortgage lending had to be scaled back enormously. Also, many banks no wanted to take the risk of lending money to people that had less than perfect credit, which meant that many potential borrowers found themselves left out in the cold. The situation reached crisis point and the government had to intervene with a multi-billion pound rescue package, which it was hoped would make things easier in the year to come.

Sadly, however, industry officials are predicting that mortgage rationing is actually set to get worse over the coming year, and concerns about the state of the sector have led to the Prime Minister, Gordon Brown, making talk of ploughing billions of pounds more of taxpayers’ money into the banking industry. In the meantime, consumers continue to struggle to find low rate mortgage even though the base interest rate has fallen to its lowest level in the three hundred plus year history of the Bank of England.

In addition to struggling to find affordable mortgages, it is thought that borrowers will still be expected to pay increasingly high deposits to lenders, with many now demanding in excess of 25 percent of the property value and some demanding 40 percent or more, which is something that most first time buyers simply cannot afford to do. This means that whilst house prices are expected to keep falling the level of property sales may not improve because would be buyers may still be unable to get the mortgage that they need.

One industry official stated: “The number of deals available for those with a deposit of 25% or more continues to increase as the lenders are looking to cherry pick the best customers. Worries over falling house prices and the potential of customers getting into negative equity has caused the number of deals for customers with just a 10% deposit or less to fall to an all-time low.”

Recent reports show that at the beginning of last February there were over twelve hundred mortgages available for those with just a 5 percent deposit, but this figure has now plunged to just twenty one lenders. It is thought that over the course of this year an increasing number of lenders will raise their deposit requirements in order to minimise on risk during the recession as well as to shore up their finances, and this means that there could soon be even fewer 5 percent mortgage deals on offer to borrowers.

One broker said that those that only had a small deposit to put down, such as first time buyers, would find things were going to get tougher and tougher in terms of getting a mortgage. He said: “The spread between the interest rate you pay if you have a small or a big deposit has widened considerably. Someone with a small deposit has to pay a much bigger premium on their interest rate and they are also shut out from some of the most attractive deals, such as tracker deals.”

Situation with mortgages set to get tougher is a post from: Glitec Loans

With this in mind many may be planning to cut back on the cost of Christmas this year, and officials have pondered over just how Christmas spending levels are likely to be affected by the financial situation, and one business advisory group, Deloitte, has carried out a study in order to try and determine how consumer spending will be affected over the festive season with some surprising and sometimes worrying results.

Overall, it is thought that consumer spending will be down by 7% this Christmas compared to last year, taking into account spending on things such as gifts, clothes, entertainment, socialising, and other related purchases and activities. This means that retailers could be facing a very tough time, and many have already started slashing the cost of products in the hope of enticing consumers and tempting them into spending more money on the High Street.

However, in a breakdown the survey results showed that whilst 24% of respondents said that they would be cutting back on their spending this Christmas, around 54% said that they would be spending the same amount as they did last year despite a more difficult year financially. A further 24% said that they were actually planning to spend more this Christmas than they did last year. It is thought that the average spend per adult this year will be around £655 and this includes gifts, clothes, socialising, and entertainment.

The biggest cutbacks on Christmas spending appear to be in the area of socialising and going out, where it is thought that 12% less may be spent this year compared to last. 56% of consumers are looking to buy their gifts from supermarkets in order to try and cut back on costs.

There is hope that the latest 1.5% interest rate cut could help to boost consumer spending, but one Deloitte official said: “I think the main headline is this is worst Christmas for a generation. But as a nation we’ll be spending £36bn so it’s not a total disaster. Broadly speaking, we believe sales will be flat this Christmas, with a slight fall possible.”

One worrying part of the survey results showed that around 49% of consumers aged between sixteen and twenty four planned to have a good time over the Christmas period and worry about how to pay later on.

Another official said: “This age group has grown up in an affluent society with technology products and designer wear, are comfortable with debt, and have never been in a recession. Their high propensity to spend represents an opportunity for those retailers targeting younger customers.”

What will our Christmas spending be like this year? is a post from: Glitec Loans

Over 77,000 new enquiries are said to have been made since October of last year in England and Wales, and these were off people with mortgage and debt arrears. Officials from the CAB said that those most affected were more vulnerable households. In many cases people had fallen into arrears after losing their job, losing their partner, or becoming ill. Over half of those calling the charity were aged between 35 and 49, and one fifth of callers were single parents.

An official from the charity said: “While we are pleased to see the number of consumer credit problems going down, the increase in the number of inquiries about basic essentials is worrying. These figures show how the current economic situation is hitting vulnerable and low-income households the hardest.”

He urged those experiencing problems to ensure that they contacted their lenders to try and come to an agreeable solution, stating: “All creditors should treat borrowers in arrears fairly and sympathetically, negotiate with borrowers in trouble and only use court action for mortgage arrears as a last resort.”

He also said that lenders needed to make sure that, in the current climate, with even banks having to be bailed out, they did all that they could to help struggling consumers.

Financial crisis prompts more people to take debt advice is a post from: Glitec Loans

This has made it difficult for many consumers to get mortgage finance from lenders at an affordable rate, and has severely affected the housing market, where prices have been plummeting for ten straight months. However, it is not only the traditional property purchaser that has been suffering as a result of the current conditions in the mortgage and housing sectors. Officials have said that buy to let investors have also been hard hit by the current conditions.

Figures from lenders in the UK have shown that the demand for buy to let mortgages has been falling in the first half of this year, with an 18% drop in buy to let mortgage loans for the first half of the year compared to the final half of last year. This was also the first fall in buy to let mortgage loans for three years, with just 144,600 new buy to let loans being taken out in the first six months of the year.

Officials from the Council of Mortgage Lenders said that it was unlikely that rents would fall because the demand for rental properties was still high, with many people who are now unable to get a mortgage to buy their own home looking to rent instead. The level of mortgage loans for traditional property purchasers has fallen by 28% in the first half of this year compared to the final half of last year.

A CML official said: “We expect the rental market to remain underpinned by strong demand, partly because some people who would like to buy a home are being forced to carry on renting for now.”

However, landlords are running into similar problems as other consumers, in that they are finding it harder to get a buy to let mortgage due to tighter credit conditions, and are having to find a larger deposit to put down. Another recent report also suggested that there are now over ten thousand landlords that have fallen three months behind on their mortgage repayments. It went on to suggest that many landlords may decide to try and sell their properties prematurely in the event that they were unable to keep up with mortgage repayments.

How are buy to let investors being affected by the global credit crunch and falling house prices? is a post from: Glitec Loans

The company, Blenheim Bishop, was founded by Jonathan Vandermolen, who said that over the years the firm has enjoyed great success and has remained busy. However, since the onset of the housing slump business has reached such a low level that he has been forced to make a number of sales staff redundant and close the doors on its sales operations. The company will still focus on letting properties, as the number of properties coming onto the market for rent, and the high demand for rental homes, makes this the more viable option.

Reports indicate that the housing slump has already seen a number of other formerly busy and successful London estate agents cease operations, and there could be many more closures if the housing slump continues at its current pace over this year and next, as has been predicted by many industry officials.

Vandermolen stated: ‘I couldn’t make it work. Income from new homes was 75% down on the previous year and my view of that market is not good long-term.’

He added: ‘Most agents operate on the basis of a 25 to 30% profit margin. If trade is 50% down and 50% of your costs are for premises, staff and advertising, then it becomes difficult. If we have a couple of years of this, perhaps 50% of all estate agents will go out of business.’

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London estate agent closes its doors on sales is a post from: Glitec Loans

The information comes from the Council of Mortgage Lenders, with one official stating: ‘Lending on completed transactions is currently running at levels considerably lower than a year ago. However, the picture for mortgage approvals for new business and prospective lending levels in the next few months is worsening. We await the eagerly anticipated announcement of further action by the Bank of England to respond to these rapidly worsening market conditions.’

He also said: ‘Early action is needed if we are to be able to maintain a market in which UK borrowers continue to be able to access mortgage funds at reasonable prices. As mortgage costs increase, it remains important for any borrower with potential financial difficulties to speak to their lender as soon as possible, and preferably before they have missed a payment.’

One economist also stated: ‘The low level of mortgage activity is not only a consequence of slowing demand for houses due to the elevated affordability pressures facing potential house buyers, but also increasingly due to very tight credit conditions leading to markedly fewer and more expensive mortgages being available. Furthermore, potential house buyers are now having to provide higher deposit levels, which is a particularly major problem for first-time buyers. The CML data therefore highlight the need for concerted, sustained action to try and get banks to lend to each other, so that more liquidity is available to fund mortgage lending and market interest rates come down.’

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Slump in lending levels fuelled by credit crunch is a post from: Glitec Loans