Banks announce fewer loans will be available in first quarter of this year
January 23, 2008
Banks and lenders across the UK have announced that during at least the first three months of this year there will be fewer loans made available to both businesses and consumers in the UK, with the effects of the global credit crunch coupled with fears over bad debt levels driving lenders to increase stringency and cut back on lending. The Bank of England has stated that whilst there has already been a crackdown in lending, with lending conditions tight during the last quarter of 2007, this is a situation that is set to get worse in the coming months.
Lenders have been forced into cutting back on lending due to higher inter-bank lending fees and less availability and liquidity in the money markets, and this has impacted on lenders’ willingness and ability to offer finance in both the commercial and the private sectors. It is thought that many households and businesses will be hit hard over the coming months as a result of reduced finance availability, and according to the Bank of England mortgage lending levels in the last quarter of last year have already taken a battering.
One official at American Express stated that increased difficulties in wholesale funding and inter-bank lending was having a knock on effect and impacting on the ability of consumers and businesses to borrow money. Some are worried that the economy in the UK could come close to recession, although a number of industry officials have stated that there is no recession imminent, although the economy is at risk of a sharp slowdown. Another industry professional stated that the tight credit conditions in the UK was set to impact significantly on consumers spending levels over the coming months.
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