Financial storm looks to have been weathered

The UK mortgage industry may be able to breathe a small sigh of relief as the global financial markets seem to be making something of a recovery.

According to the world's finance ministers and central bankers, the global economy's picture is now looking a little rosier than it has been and the recent turmoil that had threatened the stability of financial markets across the globe could be coming to an end. However, experts believe that caution is still required if the financial sector is to get through this period.

Meetings of the World Bank and the International Monetary Fund (IMF) have suggested that most experts are of the belief that the worst of the credit crunch could already be over, meaning that the mortgage market may see some improvement as confidence returns to the sector. The collapse in the US sub-prime market had threatened to cause a serious crisis across the globe, but careful stewardship of the financial economy by some of the main international and national players seems to have had a positive result.

However, the watchword of those at both the IMF and World Bank meetings was 'vigilance', as experts insisted that any complacency could result in further turmoil in the near future.

The UK mortgage market has suffered in the wake of the US sub-prime collapse and in an effort to stabilise the market, lenders have significantly scaled back their lending practices. As a result, many consumers in the UK have suffered from the credit crunch and are finding it increasingly difficult to borrow money. This in turn has meant fewer mortgage approvals and there is concern in some quarters that this situation could result in a sharp drop in property prices. While such a trend would be good for first time buyers in the market, it could cause many to fall into negative equity and would also see mortgage lenders facing a difficult time.

However, if the experts are correct and the global financial economy is slowly starting to recover, the UK market may be able to ride out the current tougher conditions for the time being.

Commenting on the improving global situation, US treasury secretary, Henry Paulson, said: "The consensus [at the meetings] was that markets are better than in August.

"It has been slowly improving, but it is going to take a while," he added.

Meanwhile, Ernst & Young's latest report has suggested that the credit crunch affecting the UK mortgage market will have a negative impact on the country's overall economic growth next year. The figures demonstrate Mr Paulson's view that the improvement will take some time, although the conclusions of those at the recent World Bank and IMF meetings should present a chink of light at the end of the tunnel for those in the mortgage market.