Output of the production industries decreased by 1.3% in Q2 2012 compared with Q1 2012 following a decrease of 0.5% between Q4 2011 and Q1 2012.
Construction sector output decreased by 5.2% in Q2 2012 compared with Q1 2012 following a decrease of 4.9% between Q4 2011 and Q1 2012.
Output of the service industries decreased by 0.1% in Q2 2012 compared with Q1 2012 after an increase of 0.2% between Q4 2011 and Q1 2012.
GDP in volume terms decreased by 0.8% in Q2 2012 when compared with Q2 2011.
Ben Thompson, managing director of Legal & General Mortgage Club, said the impact for mortgage borrowers was uncertain.
He said: “The economy is weaker and the recovery phase keeps going back. We have also seen the launch of the Funding for Lending Scheme which ought to bring some more lending and price competition into the market.
“So we see Bank Base Rate not rising for quite some time and SWAP rates have been falling as well as some funding costs. That ought to point to cheaper mortgage rates for many, the question is for whom?”
Thompson said L&G expects more fierce competition for borrowers with large deposits and equity in their homes and hope that this competition forces lenders up the risk curve in the second half of this year.
And he added: “The fact remains that it is much more expensive in terms of capital for banks to lend to borrowers perceived to be of a higher risk.
“Those capital rules are here to stay, certainly for now, and so we don't anticipate radical changes to pricing for those with smaller deposits and equity, moreover a small increase in availability and some fine tuning on price.”
Thompson said he expects Bank Base Rate will be lower for longer so there is no imminent threat of a rate rise.
“That makes trackers look good when priced meaningfully below fixed rates,” he added.
And Which executive director Richard Lloyd said: “Today’s shocking GDP figures are further evidence of what hard-pressed consumers know only too well, that we are in the midst of the biggest financial squeeze since the 1920s.
“Alarming numbers of people say they are forced to take on new forms of debt just to make ends meet and many more say they would not cope with unexpected shocks to their incomes or household bills.
“The Chancellor needs to get money back in people’s pockets to help households who are struggling to cope with rising fuel, energy, mortgage and food costs.
“That’s what will really boost consumer confidence and spending power, which is essential for getting sustainable growth going in the economy.”
