John Wriglesworth predicts possible fall in housing market.

Money Marketing cites economist John Wrigglesworth, who predicts that the UK housing market could fall by 50 per cent. He says that if lenders return to lending at
a multiple of three times income, then housing prices could drop by 50 per cent,
returning to their level of early 2000. This was when lending criteria began to
be loosened.
Wrigglesworth, who is managing director of Wrigglesworth Consultancy, says the British government has to inject £350bn into the mortgage market through the Bank of England special liquidity scheme. He considers the initial £50bn pretty paltry.
I suppose this is the time to batten down the hatches. The number of transactions has dropped sharply and I wonder what the government will do since it will want to go into the 2010 general election with a strong housing market to get that
"feelgood" factor.

When will the credit crunch be over?

In the United Kingdom there have been a range of forecasts on
when the credit crunch will be over. We seem to be a bit behind
of the United States, which apparently is in recession according
to some pundits.

However, Money Marketing has cited Ray Boulger, technical manager
at John Charcol, who says the housing market figures are not that bad
in reality. For March, Boulger noted that the real fall in house
prices was 0.1 per cent according to the Nationwide. However, this
fall was seasonally adjusted to 0.6 per cent.

Perhaps the UK economy will escape a recession but the performance of the
housing market will be key. The government has not helped by increasing
taxes. Housing minister Caroline Flint was photographed with a briefing
document forecasting a 2008 decline of 5 per cent to 10 per cent
at best.

The Bank of England governor Mervyn King has more or less stated
that he will not reduce interest rates in the short term.

Will banking problems hit wider UK economy?

Will banking problems hit the wider UK economy? The mortgage market has shrunk following the travails of Northern Rock. With the number of loan products being reduced and with hefty deposits required, the British housing market is going
to be travelling at a reduced speed. Some homeowners will be trapped and will be
unable to move despite the job offer, downsizing, divorce, death of a partner
etc.
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The Bank of England has cut interest rates but these have been used by the banks to reinforce their profitability. It has been heartening that some banks such as
Royal Bank of Scotland, HBOS and the Bradford & Bingley are reinforcing their balance sheets with rights issues. (The missus has 250 shares in Bradford & Bingley).
HSBC looks big enough and ugly enough to get by so we just have to wait for
Barclays' decision on whether to go ahead with a capital increase.

Profitable and strong banks are vital for an economy even though they can come across as robbing institutions. The British banks have been guilty of pushing cheap credit and it is becoming a shock to the UK consumer for the reverse to happen.
Maybe we are looking at just a further six months of pain.

Are you bearish or bullish?

Are you bearish or bullish? I was thinking about increasing my pension provision again and just felt a wave of defeated boredom. I have not got enough spare money.
Are UK equities going to be top-class performers or should I just try and pay off
as much of the mortgage as possible?

I was amazed that there have not been more British banks following the path of
Royal Bank of Scotland and Halifax (HBOS) in launching rights issues to raise more money from their shareholders. I could buy them and hope then
the shares of the two banks go up enough over the next 15 years so that I could retire. (I have been rereading this last sentence and I think it is a load of rubbish!!)