April 1 Prime Minister Gordon Brown said the U.K. government will help first-time homebuyers and take steps to combat a surge in credit costs, the latest effort to regain voters’ confidence in his handling of the economy.
Brown said Britain has asked global financial regulators to meet more regularly and for banks to disclose losses more quickly. Investment Services The government, he said, will keep a lid on inflation, enabling the Bank of England to cut interest rates. He also said ministers will push banks to boost lending to small companies and provide public money for homebuyers in shared-equity purchases.
“Our task will be to steer people through this global financial turbulence and to be on their side,” Brown told reporters at his monthly press conference in London today. “We will continue to examine what more we can do.”
Governments and central banks around the world are seeking an end to a financial crisis in which banks have written off over $200 billion of losses stemming from the U.S. subprime mortgage market collapse. Institutions have stopped lending to all but the safest borrowers as the cost of credit soared.
Chancellor of the Exchequer Alistair Darling will push for the steps to improve bank lending at the Group of Seven finance ministers in Washington next week. Brown said he wants ministers to attend the Financial Stability Forum, a group based in Basel, Switzerland, that now takes input from lower-level officials.
`See Action’
“I want to see action at the G-7 meeting that takes place in a few days time,” Brown said, adding that he will take up some of the measures with U.S. President George W. Bush later this month.
Brown said that domestic measures, such as the help for first-time buyers and pensioners that were announced in the annual budget last month, while important, are secondary to maintaining economic stability.
“What I want to do is to make it possible for the Bank of England to cut interest rates as it has,” Brown said “We will try to create the conditions where it is possible where rates can remain low.”
While the Bank of England has cut its benchmark lending rate by a half percentage point since December to 5.25 percent, borrowing costs in financial markets have surged after the collapse of the subprime mortgage market made banks reluctant to lend to each other.
Lending Squeeze
Mortgage lenders including HBOS Plc and Lloyds TSB Group Plc have raised the cost of their loans in recent weeks, deepening the worst slump in the U.K. property market in a decade. Nationwide Building Society, the U.K.’s fourth-biggest mortgage lender, last week said it is withdrawing some of its home loans and raising rates on others after its funding costs rose.
The Conservative opposition has overtaken the Labour government in polls asking voters to rate which party is most trusted to run the economy.
Twenty-seven percent of voters favored Labour to manage the economy compared with 35 percent for the Conservatives, according to a YouGov Plc poll of 1,926 adults conducted between March 25 and March 27. At the time of the 2005 general election, Labour led the Conservatives by 22 points on that issue, having the support of 49 percent of voters on economic issues.
Slipping Support
The same survey showed 43 percent of voters say they will back the Conservatives in the next election compared with 29 percent Investment Services for Labour and 17 percent for the Liberal Democrats.
Economists now worry that, as the crisis in the banking sector feeds into the economy, higher borrowing costs will hurt house prices and trim household spending.
“The effects will be felt,” said George Buckley, chief U.K. economist at Deutsche Bank AG in London. “The effects are already feeding through to the number of mortgage approvals, where there is evidence that numbers are falling, not just because of demand, but also because of supply.”
The current turmoil in credit markets is the most severe crisis for banks in 30 years, surpassing Black Monday in 1987, the Asian crisis of 1998 and the burst of the Internet bubble in 2000, Morgan Stanley and Oliver Wyman said in a joint report.
Last month, Darling said the U.K. Treasury is taking a “cautious view” of the economic outlook. The Treasury cut its forecast for U.K. Investment Services growth in the coming year to between 1.75 percent and 2.25 percent in its annual budget statement.
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