Mortgage credit crunch worse as unemployment and inflation soar

If you thought that you had mortgage worries now, then you will not want to look at the state of the UK’s economy, things certainly look very bleak right now. As a country we are now facing soaring unemployment along with surging inflation, add to this rising fuel costs and food prices and what we are left with is a major credit crunch. With all this taken in to consideration business leaders are expecting inflation to rise to 3.8 percent this year, and they expect inflation to stay above 3 percent for the next ten months, this is according to CBI.

Many of you will be wondering why this will affect the mortgage market, well if you think that 200,000 people are expected to lose their jobs by the end of next year, a huge proportion of them will have a mortgage that they are unable to pay. If CBI’s figures are correct, then unemployment will hit a ten-year high of 1.89 million. One sector that will see the largest number of job losses will be those in the building trade sector and the financial sector, this is due to the current housing market slump.

We are already seeing the affects of this in the mortgage sector, and things are set to get a lot worse. Ian McCafferty, chief economic adviser at the CBI has said “It is very much consumer-facing companies who are at the centre of the downturn.” He has said that more than 20,000 jobs have now been lost this year alone in these areas. Once inflation does rise, we will then see the UK economy lose its steam to almost a crawl next year. Mr McCafferty added “We will avoid recession, but there is a very prolonged period of very sluggish growth in prospect.”

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