Credit report raises interest rate cut hopes
Posted on 3 January 2008 by
A report from the Bank of England has confirmed that lenders have become less willing to lend to homeowners or businesses in recent months.
The Credit Conditions Survey for the final quarter of 2007 predicts that the credit squeeze will worsen in 2008, and that more homeowners will default on their loans.
However, the Council of Mortgage Lenders (CML) said that while the survey's sentiment was gloomy, the rate of defaults on secured loans had not been as high as lenders feared three months ago.
"This survey corroborates other evidence of worsening market sentiment," said the CML's head of research Bon Pannell. "This may increase the chances of interest rate cuts sooner rather than later if inflation remains subdued."
Meanwhile, the Libor rate (the interest rate at which banks lend to one another) has fallen below 6% for the first time since the beginning of the credit crunch last August. It appears to have eased in response to the co-ordinated injection of cash from five banks in December.
"This is excellent news for borrowers," said Charcol's Katie Tucker. "If banks can borrow money cheaper, they can lend money cheaper.
"If the Bank of England rate also falls this month, the next few weeks should bring some very good value mortgage deals back onto the market."
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