| Thursday, July 03, 2008
Lending conditions in the UK worsened on all fronts during the three months to June, driven by fears of house price falls and bad corporate loans, and are expected to continue to deteriorate over the next three months, a Bank of England survey revealed today. In its quarterly Credit Conditions Survey, the central bank said the availability of secured and unsecured loans to households as well as corporations has fallen since March is expected to decline further through September. But the demand for these loans is also drying up, with secured lending for house purchases dropping by more than the survey expected at the start of the year. Lenders believe demand for home loans would continue to drop as property prices are expected to continue falling, the central bank said. Meanwhile, the terms of the loans worsened, with spreads widening on households' secured lending and even more so on corporate lending. Indeed, spreads on corporate loans were expected to increase further -- suggesting the current seizure in financial markets is likely to continue as banks refuse to lend to one another for fear of a lack of cash, leading to more potential write-downs. Because of the difficult market conditions, default rates on loans to both households as well as private non-financial corporations increased during the second quarter and are expected to continue rising. The survey was conducted between May 27 and June 18, the Bank of England said. Source: http://www.reutersfxhub.com/
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