Bank of England sees tightening of credit

02/10/2009

A report from the Bank of England has revealed that credit conditions in the UK might deteriorate over the rest of 2009.

The institution polled lenders on their credit provision for cards, and secured and unsecured loans, finding that a tightening in the market had been experienced in the last three months.

Credit card providers indicated that they had been cutting limits and decreasing the availability of the products to consumers.

Meanwhile, customer demand for cards was also revealed to have declined.

The picture was more mixed for mortgages, with lenders seeing a decline in availability for the last three months - but forecasting a slight increase for the next three.

Commenting on the Bank of England report, Oliver Gilmartin at the Royal Institution of Chartered Surveyors said: "The survey is yet to signal any significant improvements in the availability of credit to households or within the property market in general.

"However, the recent stabilisation in the housing market may be encouraging the banks to loosen their purse strings at the margin, with the availability of credit to households expected to increase in the coming quarter."

Kevin Still, EuroDebt director, added: "There appear to be a number of mixed messages, with Paul Samter, the CML economist, expecting mortgage payment problems to increase in the coming months, given the weak economy and jobs market. The Finance and Leasing Association have announced that secured lending levels remain well down on the same period in 2008. House prices are struggling to get back to the same position last year according to the Nationwide, though supportive evidence on this is fragile, with Land Registry figures showing house price declines compared to August 2008.

"With interest rates likely to rise in 2010, it is very unpredictable time for consumers and many will struggle to meet contractual payments if their disposable income is squeezed by more than £50. EuroDebt's experience is that non-borrowing debt solutions like Debt Management Plans and IVAs remain popular alternatives where people are seriously struggling to pay their debts and would prefer a managed service where the debt solution provider deals with their creditors on their behalf."

The Bank of England revealed earlier this week in separate figures that a total of 52,317 mortgages had been approved by lenders in August.

This is a decline from July's total of 52,404.

Tags; Current UK Economy, Credit Card Lifestyle, Recent Graduate Debt,

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