Bank across the world are joining forces to prevent a global recession. The Bank of England the U.S. Federal Reserve and European Central Bank and their counterparts have pumped £55 billion into the money markets.

100% mortgages lender Northern Rock was the first victim of the bad credit mortgages crisis. This new move goes to show that the banks are worried that other lenders might go the same way as the Rock.

The banks are working together to prevent any prospective sharp tightening in credit conditions. Experts estimate the record defaults on bad credit mortgages to Americans with poor credit histories could lead up to £200 billion of losses at global banks.

Following the decision by the Bank of England’s monetary policy committee to cut Bank rate from 5.75% to 5.5% on Thursday, analysts are convinced further reductions are in the pipeline. This will help towards reset rates of bad credit mortgages borrowers.

The analysis, by Citigroup, suggests spending will rise just over 1% in 2008, after an increase of more than 3% this year.

US Federal Reserve, has cut its key Federal Funds rate by a quarter-point to 4.25% today. This is another move to counter act the bad credit mortgages crisis.

Weak growth and high inflation is highly likely next year. It calculates the probability of UK growth of less than 1% in 2008.

This morning on the BBC Vince Cable, Liberal Democrat leader voices his concerns :”It is not going to work,” Mr Cable told the BBC’s Andrew Marr show.

“The amount of money being sunk in [Northern Rock] is absolutely staggering. There is no end to it.” Mr Cable repeated his call for the government to take temporary control of the bank’s affairs but said he was not arguing for nationalisation for “ideological reasons”.

100 % mortgage lender Northern Rock’s board wants to spend the next month working with both Virgin and Olivant to refine their bids.

The Sunday Times newspaper added, it is extremely unlikely that any outline deal would be reached by the Christmas deadline set by the government.

Gordon Brown said last week that “all options” were still being considered but that the government was trying to find a private buyer for the business.

Welcome news for borrowers, this will typically save borrowers between £15 & £20 per month on a 100′000 mortgage. Many of borrowers are facing the prospect of more expensive mortgage repayments as they come off short-term fixed-rate deals taken out when interest rates were lower. “This will reduce the risk of payment shock for the 1.4 million borrowers coming off fixed rates in the next year.”

The cut was expected by most chief economists as this week’s figures indicated that economic conditions had deteriorated over the past few weeks. The cut is aimed at preventing the slowdown getting out of control. It is the first cut since August 2005. Their view is another 0.25% cut is on the cards due to  CPI inflation still rising.

Will the lenders pass the mortgage rate cut on? Larger lenders such as the Halifax & Nationwide have passed on the saving to mortgage borrowers, so its likely that other lenders will follow suit to stay competitive.

In a recent report from the London Housing Federation, it was estimated that first-time buyer needs to earn more than £100,000 in order to afford an averagely priced house in 25% of all London boroughs.

The average price for a house in the capital has hit £318,000, which is double the national average that first-time buyers can expect to pay anywhere else in the country. Desperate times for first-time buyers have created what is being described as a ‘social crisis’, where increasing numbers of people are struggling to get their foothold on the property ladder.

House prices in London have been steedily increasing since 1997, fuelled by huge City bonuses and foreign investment. In fact the average house price has now increased by 161% of what it was in 1997, whereas income has only increased by 40%. With this in mind, first-time buyers are now saying that they need to earn an income of over £86,000 to buy an ‘averagely’ priced house in the capital, based on traditional lending multiples. The actual average earnings in London are more like £24K, therefore the first-time buyer needs to look at borrowing 13 times their salary in order to buy their own home, which mortgage lenders would never agree to.

The cheapest properties are in Dagenham and Barking, but even then first-time buyers are looking at paying £175,159 to get a foothold on the property ladder. This would mean actually earning an average of £47K or borrowing over 8 times the first-time buyers average earnings, when most mortgage lenders will only advance 4 times.