BoE warns credit will become tighter

by Gill Montia

Story link: BoE warns credit will become tighter

The Bank of England has published the findings of its latest quarterly credit conditions survey and is warning UK consumers to expect further pressures on personal credit during the remainder of 2008.

The survey found that lending declined more than expected during the third quarter of 2008 and the Bank is predicting that High Street banks and building societies will restrict lending further during the final three months of the year.

The report refers to a further reduction in overall unsecured credit availability, associated with a further tightening in lending criteria and declines in approval rates.

The deepening of the credit crisis since mid-September has led to a sharp rise in Libor, the rate at which banks lend to one another.

Leading mortgage providers have already begun to increase rates and credit card providers may be forced to follow suit.

According to financial website, Moneyfacts, interest rates on some store cards have already risen, with women’s clothing retailers, Karen Millen, Oasis and Principles increasing rates by up to 4.3%, to 28.9% APR.

The Bank of England report also warns that worsening economic conditions will lead to a rise in loan defaults by the end of the year.