By common consent, Gordon Brown’s first year is ending up as a shocker for Labour.

It may have started well last June with assured handling of a bomb threat and a swift response to the foot and mouth outbreak last August. Pledges to cut back on two largely unpopular measures: Tony Blair’s plans to open “super casinos “and the extension of drinking hours, also struck a chord with voters.

But since the infamous “bottled election” last Autumn, nothing seems to have gone right for the man who waited so long for the top job. The opinion polls are full of doom and Westminster insiders say talk of finding a successor before the expected 2010 election is rife.

Brown’s supporters say it is unfair to blame him for world trends outside his control — it was the credit crunch that began in the U.S. that caused the Northern Rock collapse and what is the British prime minister supposed to do about sky-high world crude prices that are driving up inflation?

What is your verdict on Brown’s first year?

It’s been an eventful week for the housing market — the latest in a turnaround in fortunes brought about by the slowdown in house price growth and the liquidity crisis sparked by the U.S. subprime woes. This side of the Atlantic, the fallout from the credit crunch has continued apace, and lenders’ PR machines have been working on overdrive.

A week ago, First Direct withdrew mortgages for new customers after its relatively cheap deals saw borrowers flock to its doors. Then, on Monday, Britain’s biggest mortgage lender Halifax raised its rates, hiked its minimum deposit to 5 from 3 percent and introduced cheaper rates for those with 25 percent or more of their property value to put down. On Tuesday the first-time buyer became an endangered species: Abbey, Britain’s second largest home loan provider, stopped offering 100 percent mortgages, joining all its major rivals in requiring at least some deposit from borrowers — and pricing many trying to get a foothold on the ladder out of the market. The same day the Halifax house price index for March showed the largest fall since the recession of the early 1990s.

It comes as little surprise, then, to see the Nationwide reporting on Wednesday a four-year low in consumer morale during March. That tallies with an ongoing “flight to safety” that has seen people pull in the purse-strings and seek out safe havens. In the wake of the Northern Rock debacle, government-backed National Savings & Investments (NS&I) products have soared in popularity. NS&I offers savers a 100 percent guarantee, whereas the Financial Services Compensation Scheme protects cash on deposit with Financial Services Authority-regulated institutions only up to 35,000 pounds each.

NS&I, which pumps all the money it makes into the government (ironically, now the owner of Northern Rock), doubled its net financing target for 2007/08 to 5.6 billion pounds from an initial forecast of 2.8 billion pounds. The final figure will come in near to those 5.6 billion pounds, chief executive Jane Platt told me at a press dinner on Tuesday evening.

The increase is attributable to a number of factors: the market conditions and Northern Rock; Bank of England base rate rises totalling 1 percent between August 2006 and July 2007, and higher-than-expected inflation. Together, these have resulted in a boom in demand for NS&I’s products, in particular its direct ISA, the rate on which is tied to the base rate, and savings accounts which guarantee to beat inflation by a certain margin.

“It’s chicken soup time,” says Platt. “People have been living off caviar, but now it’s time for chicken soup.”

But Wednesday has also brought some positive news: the government appointed former HBOS chief executive Sir James Crosby to head a working group on ways to improve the functioning of the country’s mortgage markets, and HSBC said it would exploit rivals’ weakness in the mortgage market with an offer to match homeowners’ existing deals — a move that should do at least something to boost confidence.

It is, of course, vital for consumers that sources of funding for Britain’s mortgage market are refreshed. And the HSBC move has fired a shot across the bows of other lenders, ramping up competition in a market that some lenders are using to boost margins.

“I think what we’re going to see is some very profitable lenders over the next 12 months,” says Alex Murray, group director of mortgages at independent broker Thinc Group. “Some lenders are using the credit crunch as a way to streamline their proposition: many are going down the route of profit before volume.”

The broker is unable to help around a quarter of potential customers — either they want to borrow too much against the value of their property or their credit history is not clean enough. But, hopefully, this new working group will bring some much-needed confidence back to the market, aided by an anticipated cut in interest rates on Thursday: the crisis in liquidity has rapidly turned into a crisis of confidence.

In reality, though, that will not happen overnight, and the next few months will prove critical as to whether current woes prove a glitch or spell a chicken soup diet for far, far longer.

Shadow Chancellor George Osborne answers criticism that the Tories offered no credible alternative for the rescue of Northern Rock in this interview with Tim Castle at the Conservative Spring Conference at Gateshead.

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