Banks set to continue reducing lending

According to recent data released by the Bank of England, UK lenders are set to reduce their lending levels even further as the global financial crisis continues to wreak havoc in the nation’s financial market. Both banks and building societies have said that they plan further cutbacks in the lending levels in the near future.

Further cutbacks in lending will inevitably have a knock on effect on consumer confidence as well as on the economy as a whole. Since the onset of the global credit crunch lenders have already started exercising far more caution over their lending, and the level of lending has fallen while the cost of borrowing has increased.

The Bank of England report showed that the fall in new mortgage lending over the past three months had been greater than had been expected, and that for the last three months of this year lenders were expecting to reduce their lending even further.

The report stated: “Lenders reported that the changing economic outlook, their expectations for the housing market, and changes in their appetite for risk had contributed to the decline in credit availability.” An industry official added: “This is precisely what we would have expected, it reinforces the fact the housing market still has a lot further to weaken yet.”