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What now for UK mortgages?

It will come as no surprise to see the warning flags starting to appear across the UK mortgage sector. Funding is quickly disappearing from the money market, the housing market is in a sharp decline and nobody wants to buy a home today. Mortgages are now sure to increase as the cost of debt on the money markets is sure to balloon over the next few days and weeks.

We have already seen Halifax cut its mortgage portfolio by 50%, others increase both their rates and the deposit levels rise. However, if the doomsday scenario is to be played out we will see mortgages rates rise substantially even from these relatively high levels. As confidence continues to ebb away from the markets this will impact on many different areas of the economy, consumer spending will fall, companies will struggle and jobs will be lost, then consumer spending will fall yet further and the vicious circle continues.

The UK government MUST be working on a plan behind the scenes as to leave the markets to free fall would not only see the unemployment figure rise and more pressure put on the public purse but it would also be political suicide. Watch this space as Gordon Brown and the government are being pushed into a corner and they really do need to come out fighting.

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