Credit Crunch News...
Credit crunch news
Dec 18, 2007
More bad news to come - BoE
Mervyn King told Parliament's Treasury Select committee that there was more bad news to come and that the central banks had joined forces to prevent a sharp slow down as a result of the credit crunch.
"The problems in the financial sector remain with us, a painful adjustment faces the global banking sector over the next few months as losses are revealed and new capital is raised to repair bank balance sheets. The actions demonstrate that central banks are working together to forestall any sharp tightening in credit conditions that might lead to a downturn around the world," King said.
The BoE offered 10 billion pounds of three month money, which was taken up at a minimum of 5.36% following the European Central Bank's own injection of cash of 500 billion Euros.
This joint action may not be enough to do the job and is considered unlikely to bring about a reduction in spreads as inter bank lending continued to trade at higher premiums over central bank's rates. Lack of cash is not the problem - it is a lack of confidence between the banks and their unwillingness to lend between themselves as they don't know the extent of their exposure to sub prime losses.
Buy to letters opt to sell
The Royal Institution of Surveyors (RICS) states that more landlords are opting to sell when tenants move out as a result of the credit crunch. The proportion has risen from 6.1% to 6.5% in the last quarter, which is the sharpest increase in for three years.
Experts have maintained that with this poor credit crunch news that this is a result of falling yields through higher house prices, making it harder to earn a profit. Some fear that the buy to let sector is the UK's equivalent to the US's weak sub prime market - further fears are for additional sales when (but maybe if?) the new stamp duty taxes are relaxed in April 2008.
The RICS spokesman Jeremy Leaf said: "A combination of the tightening lending criteria and successive interest rate rises has started to hit the buy-to-let market but with the drop in capital gains tax due in April next year, many landlords will resist selling until the spring."
"With rents still on the increase many would-be buyers will find accessing the housing market even more difficult as they struggle to raise the capital for that first important purchase. However, many landlords will still take solace from uncertainty in the economy and enjoy the gains from rising rents."
Return from Credit Crunch News to Credit Crunch