Falls across the mining sector pulled the index back from yesterday’s ten month high to 4,865.10, a 0.64 per cent drop. The rally had been fuelled by growing signs the global economic recovery is quickening.

The drop in UK shares followed a muted end of session in New York, where the Dow Jones industrial average ended up just 3.32 points at 9,509.28 after a buying spree.

Overnight in Asia shares also slipped in a part reversal of the previous day’s solid gains, as many investors stuck to the sidelines, awaiting more clues on whether the economic recovery would prove long-term.

Japan’s Nikkei average shed 0.8 per cent after jumping 3.4 per cent the previous day, its biggest one-day gain in three and a half months.

In Europe Frankfurt’s DAX slid 0.67 per cent to 5,482.99 and Paris’s CAC 40 edged down 0.91 per cent to 3,618.77 points.

The contents of this blog are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. The Wise Money Blog cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.

The contents of this blog are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. The Wise Money Blog cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.

Figures from the Financial Services Authority, which has regulated mortgages since 2004, show that 38 per cent of Britain’s 11.1 million mortgage borrowers — or more than one in three — may have made inadequate provision to pay off their capital sum.

Many are in negative equity and the savings products taken out to cover the capital repayments have fallen short. That 38 per cent figure does not include those with endowments or buy-to-let investors who took out interest-only mortgages to keep the cost down.

Experts said that homeowners who pinned their hopes on their house covering the cost of paying off the mortgage were most at risk after house price falls of 22 per cent from peak to trough, according to figures from Halifax.

A spokesman for the FSA said: “At the top of the market it was the case that for a lot of borrowers, interest only was the only way they could afford to buy. For these borrowers it becomes increasingly difficult to pay off the capital as time goes on.”

A spokeswoman for the Council of Mortgage Lenders said that at the moment homeowners cannot rely on house-price inflation to cover the capital repayment. “They will have fewer options available if they get into difficulty, as switching to interest-only is a coping strategy when you have payment problems.”

Interest only deals first appeared in the early eighties alongside endowment policies. Endowment mis-selling in the late eighties brought an end to their common use as a repayment vehicle but the concept of interest- only remained.

About 40 per cent of borrowers on interest-only deals took them out before 2003, according to moneysupermarket.com, although there was a surge in applications in 2006 and 2007, as house prices rose.

The proportion of loans that are being repaid on a capital and interest basis has fallen from 53.1 per cent at the end of 2007 to 51.7 per cent, indicating that switching to an interest only loan has continued.

The contents of this blog are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. The Wise Money Blog cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.

The market initially perceived the split of 3 to be in favour of a lesser increase than the £50 billion expansion in QE decided.

In fact the 3 – King, Besley and Miles wanted an expansion of £75 billion which confirms two things; one is that assumption is the mother of all errors especially when looking at current market conditions and also that the MPC are very very cautious and would rather do more than not enough.

This leaves the door open for more Quantitative Easing especially as Mervyn King was petitioning for larger stimulus and paints a pointedly negative slant on the UK economy from the MPC…hence this led to sterling weakness against the USD and EUR.

The contents of this blog are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. The Wise Money Blog cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.

The positive trend was started wit the news that CPI data for the UK (a key indicator on inflation) came in unchanged at +1.8%. Although the inflation level is still below the 2% target a drop was widely forecast.

This was especially true against the BoE raising the QE programme by £50 billion and the feedback from the quarterly inflation report which noted that inflation was set to fall below 1%.

Sterling jumped on the news as the market digested a less dovish underlying data snap than the sentiment preceeding.

The contents of this blog are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. The Wise Money Blog cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.

US housing starts and permits fell unexpectedly in July, as hopes for a boost from falling house prices and government stimulus efforts for first-time buyers proved over-optimistic.

Privately owned housing starts fell 1 per cent to a seasonally adjusted annual rate of 581,000 units. This was well below market expectations for 600,000 units and significantly less than the revised 587,000 unit figure for June, according to figures from the US Commerce Department. Compared to July last year, housing starts dropped 37.7 per cent.

Construction starts for single family homes, the worst hit part of the housing market, rose 1.7 per cent to an annual rate of 490,000 units, the highest since October. But the headline figure was dragged down by a 13.3 per cent fall in starts on multi-family units.

New building permits, which give a sense of future home construction, fell 1.8 percent to 560,000 units in July. Analysts had been expecting 580,000 units. Compared to the same period a year-ago, building permits declined 39.4 per cent. This was despite the $8,000 Federal government tax credit stimulus efforts introduced for first-time buyers.

The inventory of total houses under construction fell to record low 609,000 in July, the department said, while the total number of permits authorised but not yet started also hit a record low at 102,300.

US stocks rose in morning trade as the surprise drop in housing starts was offset by better-than-expected results from retailer Home Depot. The Dow Jones industrial average was up 63.63 points, or 0.70 per cent, at 9,198.97.

The contents of this blog are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. The Wise Money Blog cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.

China’s markets have shown increasing volatility this month as investors chase rumours that China’s banks have been ordered to cool the surge of lending seen in the first half of the year.

Some analysts have estimated that up to 20pc of the $1 trillion (£615bn) in bank lending in the first half of 2009 has been funnelled into property and the stock market, creating a fresh round of asset price bubbles.

Reports have also suggested that rises in metal and other commodity prices this year have been driven by Chinese inventory stock-piling rather than actual demand, further dampening the appetite of investors.

Confidence had already been hit after a report released on Friday showed US consumer confidence was weaker than expected in August, confirming that China’s exporters will not see recovery in the short term.

And foreign direct investment in China fell for a 10th month in succession in July as international companies stalled expansion plans amid the global financial crisis, according to figures released by the Commerce Ministry.

Although the market is still showing a 58pc gain this year – down from a high of 90pc on August 4 – the market has see-sawed since July on rumours and media reports that credit policy was tightening.

Despite some record land sales in China in the first half of this year, fuelled in part by state-owned enterprises seeking a home for easy credit, new property sales fell by 20pc to 30pc in major cities, indicating a worrying imbalance between supply and demand.

The contents of this blog are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. The Wise Money Blog cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.