divimg alt="" src="http://hits.guardian.co.uk/b/ss/guardiangu-feeds/1/H.15.1/74066?ns=guardianpageName=Money%3A+Mortgage+approvals+back+at+record+lowch=Moneyc3=guardian.co.ukc4=Mortgages+%28Money%29%2CProperty%2CMoney%2CMortgage+lending+figures+%28Business%29%2CBusiness%2CHousing+market+%28Business%29%2CUK+news%2CBorrowing+and+debt%2CCredit+cards%2CPersonal+loansc5=Personal+Finance%2CCredit+Crunch%2CNot+commercially+useful%2CBusiness+Markets%2CProperty+Mortgages+and+Interest+Ratesc6=Hilary+Osbornec7=2008_12_01c8=1126770c9=articlec10=GUc11=Moneyc12=Mortgagesc13=c14=h2=GU%2FMoney%2FMortgages" width="1" height="1" //divpThe number of a href="http://www.guardian.co.uk/money/mortgages"mortgages/a approved for house purchases fell back to a record low in October, despite a fall in a href="http://www.guardian.co.uk/money/interestrates"interest rates/a at the start of the month, figures showed today./ppLenders approved 32,000 home loans for buyers during the month, the same record low as in August, according to the Bank of England. This a href="http://www.guardian.co.uk/money/2008/oct/29/mortgages-property-borrowing"reverses a slight uplift in September/a when 33,000 mortgages were approved./ppThe value of the loans fell below August's level, however, to £3.9bn, as falling house prices and lending restrictions pushed down the value of each loan./ppMortgage lending for new purchases is running at more than 60% below the level of last October, when 88,000 loans worth a total of £12.2bn were granted to buyers. /ppThe drop follows a year of falls in the a href="http://www.guardian.co.uk/business/housingmarket"housing market/a, which have shaken the confidence of buyers, and a period in which lenders have clamped down on high loan-to-value deals, with many now insisting on deposits of at least 25%./ppOctober's figures also show a slump in the value of loans advanced during the month, following low approval levels in previous months. /ppThe value of net mortgage lending, which takes into account repayments and redemptions, dived by 70% from £1.5bn in September to just £459m, and represented just 6% of the figure for October 2007. br / br /The fall dragged down the total net lending to individuals, offsetting an increase in the value of other borrowing taken on during the month./ppConsumer credit rose to £844m from £345m in September, and made up the majority of the total £1.3bn advanced to borrowers./ppThe increase was driven by a rise in borrowing on a href="http://www.guardian.co.uk/money/creditcards"credit cards/a, which rose from £274m to £398m, and other consumer credit including a href="http://www.guardian.co.uk/money/2007/oct/25/loans.banks"personal loans/a and overdrafts, which increased more than six-fold to £446m./ph2Building societies slump/h2pSeparate figures from the Building Societies Association (BSA) show net lending by its members was down 45% year-on-year in October to £413m, but had improved slightly from September's figure of £314m. /ppGross mortgage lending stood at £3.2bn, a decline of 30% on October last year. /ppThe director general of the BSA, Adrian Coles, said: "With the depressed state of the housing market, it is no surprise that mortgage lending by societies remains low, albeit slightly improved in September.br / br /"With confidence in the market so restrained, homeowners are choosing to stay put rather than move, while a href="http://www.guardian.co.uk/money/firsttimebuyers"first-time buyers/a continue to wait for further falls in prices."/ppHoward Archer, chief UK economist at IHS Global Insight, said the low number of approvals suggested a href="http://www.guardian.co.uk/money/houseprices"house prices/a "still have a long way to fall"./ppHe added: "Ongoing very tight credit conditions, still relatively stretched housing affordability on a number of measures, recession, faster rising unemployment and widespread expectations that house prices are likely to fall a lot further form a powerful set of negative factors weighing down on the housing market."/ppThe BSA also reported a drop in the value of a href="http://www.guardian.co.uk/money/savings"savings/a deposits paid into societies. During October, net receipts added up to just £115m, down from £170m in September and just 3% of last October's figure of £3bn. /ppOctober 2007 was a record breaking month for payments into societies, which was a result of savers looking for a new home for money taken out of Northern Rock, but this year's figure is still below normal./ppColes said: "With the continuing squeeze on household incomes, people have less to save and are possibly choosing to repay existing debt rather than save."/pdiv style="float: left; margin-right: 10px; margin-bottom: 10px;"ullia href="http://www.guardian.co.uk/money/mortgages"Mortgages/a/lilia href="http://www.guardian.co.uk/money/property"Property/a/lilia href="http://www.guardian.co.uk/business/mortgagelendingfigures"Mortgage lending figures/a/lilia href="http://www.guardian.co.uk/business/housingmarket"Housing market/a/lilia href="http://www.guardian.co.uk/money/debt"Borrowing debt/a/lilia href="http://www.guardian.co.uk/money/creditcards"Credit cards/a/lilia href="http://www.guardian.co.uk/money/loans"Personal loans/a/li/ul/diva href="http://www.guardian.co.uk"guardian.co.uk/a copy; Guardian News Media Limited 2008 | Use of this content is subject to our a href="http://users.guardian.co.uk/help/article/0,,933909,00.html"Terms Conditions/a | a href="http://www.guardian.co.uk/webfeeds/1,,1309488,00.html"More Feeds/a pa href="http://feedads.googleadservices.com/~at/SX6rOk5kYBn0q-fqzX1dT5VJseA/a"img src="http://feedads.googleadservices.com/~at/SX6rOk5kYBn0q-fqzX1dT5VJseA/i" border="0" ismap="true"/img/a/p

House prices continued to fall in November as a myriad negative factors steadily mount against the residential market, says FNB.

divimg alt="" src="http://hits.guardian.co.uk/b/ss/guardiangu-feeds/1/H.15.1/35993?ns=guardianpageName=Business%3A+Tesco+posts+worst+figures+in+16+yearsch=Businessc3=The+Observerc4=Tesco+%28Business%29%2CRetail+industry+%28Business%29%2CHigh+street+retailers%2CSupermarkets+%28business%29%2CCredit+crunch+%28Business%29%2CBusiness%2CObserverc5=Fashion+and+Beauty%2CCredit+Crunch%2CNot+commercially+useful%2CBusiness+Marketsc6=Nick+Mathiasonc7=2008_11_30c8=1126213c9=articlec10=GUc11=Businessc12=Tescoc13=c14=h2=GU%2FBusiness%2FTesco" width="1" height="1" //divpTesco will reveal its worst sales performance since the early 1990s recession this week as concern mounts that more high-street retailers are facing financial collapse./ppOn Tuesday, Tesco will report third-quarter like-for-like sales growth of just 1.9 per cent, its worst financial performance since 1992. Its trading update will concern investors in the UK's biggest retailer, whose shares have fallen sharply in recent months. Tesco, led by Sir Terry Leahy, has been hit by rejuvenated competition from Asda and Sainsbury's as well as the discounters such as Aldi and Lidl./ppAnalysts believe the UK's biggest retailer has been fighting the wrong war as it rebrands itself as the country's 'biggest discounter' in a battle to protect its dominant market share. It has also been hit by problems expanding abroad. In particular its forays into Thailand and America have not gone according to plan. /ppTesco has been slashing prices to attract shoppers hit by plunging house prices and surging unemployment. But this has hit its sales margin. As conditions for British consumer businesses deteriorate alarmingly ahead of the crucial Christmas season, its exposure to non-food items is also hurting its performance./ppThe group, which employs about 440,000 people in almost 4,000 stores across 14 countries, said this month that underlying sales in its second-biggest market, South Korea, had fallen, and that it was slowing down its expansion in the United States because of the economic downturn./ppUnusually weak numbers from Tesco are likely to contrast with a strong performance from rival Morrisons on Thursday. The country's fourth-biggest grocer is expected to report like-for-like sales growth of 7.2 per cent. Also this month Sainsbury's boasted an impressive 13 per cent profit hike./ppTesco shares have fallen about 40 per cent over the past year, hitting a four-year low of 283.8 pence earlier this month. And its growth prospects in the UK will be hit by a harsher competitive environment following a recent Competition Commission ruling that will make it harder for the chain to open stores where it already holds a dominant market position. Tesco is appealing against the decision./ppAs Tesco battles to retain market share other big-name retailers are struggling to survive in what are the worst economic conditions the British high street has seen for years. Most analysts believe the situation will not be improved by Alistair Darling's 2.5 per cent VAT reduction announced in the pre-Budget report last week. Corporate restructuring experts have told The Observer they have been pitching to a host of blue-chip businesses in recent weeks./ppAmong firms said to be experiencing intense difficulties are Sir Tom Hunter's garden centre business Wyevale; Focus DIY, the private-equity owned business which is renegotiating its rental arrangements; quoted furniture shop Land Of Leather; and specialist camera seller Jessops./pdiv style="float: left; margin-right: 10px; margin-bottom: 10px;"ullia href="http://www.guardian.co.uk/business/tesco"Tesco/a/lilia href="http://www.guardian.co.uk/business/retail"Retail industry/a/lilia href="http://www.guardian.co.uk/business/highstreetretailers"High street retailers/a/lilia href="http://www.guardian.co.uk/business/supermarkets"Supermarkets/a/lilia href="http://www.guardian.co.uk/business/creditcrunch"Credit crunch/a/li/ul/diva href="http://www.guardian.co.uk"guardian.co.uk/a copy; Guardian News Media Limited 2008 | Use of this content is subject to our a href="http://users.guardian.co.uk/help/article/0,,933909,00.html"Terms Conditions/a | a href="http://www.guardian.co.uk/webfeeds/1,,1309488,00.html"More Feeds/a pa href="http://feedads.googleadservices.com/~at/dHioHRlZPSb38c07aPjZP1KVupE/a"img src="http://feedads.googleadservices.com/~at/dHioHRlZPSb38c07aPjZP1KVupE/i" border="0" ismap="true"/img/a/p

divimg alt="" src="http://hits.guardian.co.uk/b/ss/guardiangu-feeds/1/H.15.1/68864?ns=guardianpageName=Business%3A+UK+house+prices+%27to+plunge+like+US%27ch=Businessc3=The+Observerc4=Housing+market+%28Business%29%2CUS+housing+and+sub-prime+crisis+%28Business%29%2CRecession+%28UK%29%2CBusiness%2CHouse+prices+%28Money%29%2CRepossessions+%28Money%29%2CMoney%2CObserverc5=Personal+Finance%2CCredit+Crunch%2CNot+commercially+useful%2CBusiness+Markets%2CProperty+Mortgages+and+Interest+Rates%2CUS+Economyc6=Heather+Stewartc7=2008_11_30c8=1126210c9=articlec10=GUc11=Businessc12=Housing+marketc13=c14=h2=GU%2FBusiness%2FHousing+market" width="1" height="1" //divpRobert Shiller, the Yale economist who forecast both the bursting of the dotcom bubble and America's property crash, is warning Britain's homeowners to expect things to get every bit as bad on this side of the Atlantic./ppIn London to promote his new book, The Subprime Solution, Shiller told The Observer that consumers should be wary of the comforting excuses many analysts find for explaining why Britain's housing market will be hit less hard than America's, where prices have already fallen by more than a quarter, and repossessions are rife./pp'A lot of people say that in the UK we haven't seen so many defaults on mortgages - but we're just earlier in the cycle,' he said. /pp'These housing cycles go for a long time. Real estate markets are very different from liquid financial markets, in that they have a lot of momentum, and they continue in the same direction for a long time.' He pointed out that during the last housing boom and bust, in the 1980s and early 1990s, prices in London more than doubled, in inflation-adjusted terms, 'and then they came almost all the way back down again. That's certainly a possibility now, and that would be huge. Think of all the balance-sheet problems that would cause, for banks and for households.'/ppIn his 2000 book Irrational Exuberance, Shiller warned that share prices were dangerously overvalued, and foretold the subsequent crash. He used the second edition, in 2005, to issue a timely warning about the ill-fated American housing boom, which, as in the UK, had spawned thousands of property speculators, and driven prices to once-unthinkable levels./ppRaising the spectre of the Great Depression of the 1930s, when it took many years for the world's major economies to recover, Shiller added that the government would probably have to carry out more bail-outs before the downturn is over, to help restore the public's faith in financial institutions./pp'Northern Rock was the first bank run since the 1860s. Once that happens, and you have these photographs of people lining up outside banks, there's a shock to confidence, and a loss of trust in financial institutions,' he said./ppShiller was invited to Downing Street last week to share his analysis of the crisis with Alistair Darling and Gordon Brown. He is calling for much better financial education for the public, and new standardised mortgages which adjust to suit changes in borrowers' personal circumstances./pdiv style="float: left; margin-right: 10px; margin-bottom: 10px;"ullia href="http://www.guardian.co.uk/business/housingmarket"Housing market/a/lilia href="http://www.guardian.co.uk/business/subprimecrisis"US housing and sub-prime crisis/a/lilia href="http://www.guardian.co.uk/business/recession"Recession/a/lilia href="http://www.guardian.co.uk/money/houseprices"House prices/a/lilia href="http://www.guardian.co.uk/money/repossessions"Repossessions/a/li/ul/diva href="http://www.guardian.co.uk"guardian.co.uk/a copy; Guardian News Media Limited 2008 | Use of this content is subject to our a href="http://users.guardian.co.uk/help/article/0,,933909,00.html"Terms Conditions/a | a href="http://www.guardian.co.uk/webfeeds/1,,1309488,00.html"More Feeds/a pa href="http://feedads.googleadservices.com/~at/fzUVTeMMdqvmTmN_Qf2GTkJ2KaQ/a"img src="http://feedads.googleadservices.com/~at/fzUVTeMMdqvmTmN_Qf2GTkJ2KaQ/i" border="0" ismap="true"/img/a/p

divimg alt="" src="http://hits.guardian.co.uk/b/ss/guardiangu-feeds/1/H.15.1/31884?ns=guardianpageName=Comment+is+free%3A+Heed+the+visionaries+who+can+ease+the+pain+of+recessionch=Comment+is+freec3=The+Observerc4=Economics+%28Business%29%2CRecession+%28UK%29%2CCredit+crunch+%28Business%29%2CMarket+turmoil%2CEconomic+policy%2CPolitics%2CBusiness%2CObserverc5=Credit+Crunch%2CBusiness+Markets%2CNot+commercially+usefulc6=Will+Huttonc7=2008_11_30c8=1126411c9=articlec10=GUc11=Comment+is+freec12=blogc13=c14=Comment+is+freeh2=GU%2FComment+is+free%2Fblog%2FComment+is+free" width="1" height="1" //divpThis recession is terrifying because it's assuming the character of an economic black hole. Property prices and economic activity slide, so that soon the problem becomes not the banks refusing to lend but the borrowers' worries. That creates a further downward spiral. The banks become even more cautious. Unless this cycle is broken, the economy is sucked away./ppStandard economics and standard policy responses are useless because gloom creates its own rationality. A herd effect created the bubble. Now a herd effect is creating the opposite. A solution requires finding economics and policies that break the bearish psychology./ppStep forward Robert Shiller, a softly spoken and mildly eccentric Yale professor, who specialises in studying the psychology of booms and busts. Financial markets, left to themselves he says, reliably mismanage risk. They get carried away in booms. And in busts there's a collective hysteria in which all we see is risk, uncertainty and loss. Letting 'financial markets work', as happened in Britain and America from the 1980s to today, has been disastrous. Instead, we need to devise interventions that help the markets manage risk better, which they will not do of their own accord. This, he thinks, is practical Keynesianism. I agree./ppHe was in London last week, promoting his new book The Subprime Solution and between events he met the Chancellor, the Governor of the Bank of England, the Secretary of State for Business and Regulatory Reform and even - for a few minutes - the Prime Minister. One reason for taking him seriously is that he's the only prominent economist who can claim to have predicted today's bust./ppBut his solutions are so non-standard and outside conventional thinking, and his manner so self-deprecating and academic, that it takes a while to get the radicalism of his message. Minds seemed to wander last week - and it took me a good few meetings before I understood./ppIf we are going to get banks to lend and borrowers to borrow, argues Shiller, we have got to reduce decisively the risks they confront. He starts with the mortgage market and the collapse in house prices because they are at the centre of this crisis. /ppMortgages, he thinks, always unfairly contained too much risk for ordinary borrowers. Now they are a disaster. Who in their right mind would pledge hard-earned savings as a deposit for a house in a falling property market and, on top, take responsibility for repaying a big mortgage over 25 years when they may lose their job? It is far too much risk and reflects an unfair balance of power between borrower and lender. A left-of-centre government should insist that mortgages are redesigned so they contain far less risk for ordinary borrowers./ppHis radical 'Shiller' mortgage has two components. The first is that repayments automatically adjust to the economic circumstances of the borrower over the life of the mortgage. Repayments rise in line with your growing income, but fall or stop if you lose your job./ppAt a stroke there are no more repossessions or fear of repossessions. In any case, banks hate repossessions because of the terrible PR and the irrationality of crystallising a loss on their mortgage books. For the borrower, a mortgage becomes less daunting./ppThe second component is that the borrower should be able to insure their down payment - and their housing equity - against loss. Shiller does not stop there. He thinks that the government should launch 'livelihood insurance', so that people can insure themselves against the risk of their wages being reduced. And he advocates a massive boost to the Citizens Advice Bureau network so there is an infrastructure of trusted advisers who can help citizens understand the case for better mortgages and insurance and take up the new financial packages./ppThese measures will help make the world safer for borrowers. The next step is to do the same for lenders./ppI persuaded Robert Shiller to read the Crosby report on the British mortgage market released last week by the Treasury, along with the pre-Budget report. In my view, it is one of the most alarming reports published by the Treasury in my working life./ppJames Crosby, deputy chair of the Financial Services Authority and former chief executive of HBOS, believes that without intervention in 2009, new net mortgage lending in Britain is very likely to fall below zero, spelling calamity for house prices and the wider economy./ppLike Shiller, he thinks that essentially there is too much risk for the market. Every available penny of new savings has already been earmarked, leaving none left over for new mortgages. Lenders are shellshocked. Even if the banks were nationalised, they would face the same problem./ppCrosby has a Shiller-style solution. The government must reduce the risks that are terrifying the mortgage markets. It should offer a pound;100bn guarantee so creating a pound;100bn flow of new credit to home buyers./ppThe Chancellor has promised to do something, but perhaps not this. Shiller, unsurprisingly, wholeheartedly backs Crosby. The two ideas together - Shiller mortgages and Crosby insurance - would break the gloom, take the risk out of the markets and bottom out the recession./ppThese principles could be extended to other areas of lending. The trouble is that it is not just ordinary borrowers who don't understand finance. Neither do many bankers, committed to keeping their power and offering the same old mortgages where the borrower assumes all the risk. Nor do officials, who understand the pros and cons of measures like last week's cut in VAT, but are outside their comfort zone when it comes to banks./ppIt can't go on; the risk of a deep recession is too great. We need the state to take the risks out of finance./pdiv style="float: left; margin-right: 10px; margin-bottom: 10px;"ullia href="http://www.guardian.co.uk/business/economics"Economics/a/lilia href="http://www.guardian.co.uk/business/recession"Recession/a/lilia href="http://www.guardian.co.uk/business/creditcrunch"Credit crunch/a/lilia href="http://www.guardian.co.uk/business/marketturmoil"Market turmoil/a/lilia href="http://www.guardian.co.uk/politics/economy"Economic policy/a/li/ul/diva href="http://www.guardian.co.uk"guardian.co.uk/a copy; Guardian News Media Limited 2008 | Use of this content is subject to our a href="http://users.guardian.co.uk/help/article/0,,933909,00.html"Terms Conditions/a | a href="http://www.guardian.co.uk/webfeeds/1,,1309488,00.html"More Feeds/a pa href="http://feedads.googleadservices.com/~at/ajVoUO1XoFUP5VvGMgBBMWIGPgU/a"img src="http://feedads.googleadservices.com/~at/ajVoUO1XoFUP5VvGMgBBMWIGPgU/i" border="0" ismap="true"/img/a/p