CML Market Briefing - December 2003


* The UK economy experienced stronger growth in quarter three than was first thought. GDP growth was revised up to 0.7% from 0.6% and that takes annual growth up to 2.0%.

* The official data shows that the consumer sector is still booming, with retail sales rising 0.6% in October.

* Despite more confidence in the manufacturing sector, latest data show the industrial sector is still contracting.

* The labour market continues to tighten; unemployment fell by 3,300 in October and employment rose 28,000 in the three months to September.

* Although RPIX inflation dropped to 2.7% in October, its lowest rate since January 2003, it remains above target.

* The MPC voted 8-1 to increase rates by 25bp in November. The markets now expect a series of aggressive rate hikes. However, the statement accompanying the decision does not suggest this is the case. We expect the MPC will wait until February before increasing again.

* The housing market remained firm in November with Nationwide data suggesting a 1.2% rise during the month. They now expect house prices to rise by 9% in 2004.

* It was yet another month of record gross lending with gross lending of £27.3bn and net lending of £10.5bn.

* The Bank of England has revised downward approvals data between February and September 2003. despite this they have remained very strong throughout 2003

* Despite an increase in the price of new fixed rate deals in October, they were still cheaper than variable rate lending. However, there has been a notable fall in the popularity of fixed rates.

* A recent CML survey shows that by the end of June 2003, 23.7% of mortgages outstanding were protected by MPPI policies in force. This compares with 22.6% in December 2002.