Liquidity crisis rumbles on

Posted: 23 Nov 2007 10:27:59 GMT

The liquidity crisis affecting global financial markets is ongoing and it remains too early to assess its impact, according to the Bank of England.

The liquidity crisis affecting global financial markets is ongoing and it remains too early to assess its impact, according to the Bank of England.

Britain's existing and prospective homeowners will be worried that the ramifications from the sub-prime mortgage collapse could yet affect them.

Lenders have already adopted a more cautious approach and Bank of England deputy governor Rachel Lomax warned that if this continued, the wider economy could be affected.

"The MPC's remit is to keep inflation at its two per cent target, so the key issue for us is how far the financial crisis will affect the wider economy," she noted.

Ms Lomax said that she and her colleagues on the MPC would be looking for evidence that the liquidity crisis had turned into a full-scale credit crunch.

"By which I mean a sharp tightening in the price and availability of credit to households and firms," she added.

Britons have enjoyed a prolonged period of low interest rates and despite the increases over the last 12 months credit remains relatively cheap.

The current climate though could make mortgages and other loans harder to obtain, prompting a slowdown in the housing market.

A recent survey by the Nationwide building society suggests that this is already happening, with prices expected to see zero growth in 2008.


© Houseladder Ltd




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