Loan Rates Set to Rise, Warn JP Morgan

Wed, 24 Sep 2008

Financial experts are warning that interest rates may be set to rise once again in the wake of the recent financial turmoil, which has seen Lehman Brothers collapse and several other financial institutions needing to be rescued. The recent turbulence will lead to a lack of capital amongst Britain’s banks, experts predict, and they believe that banks will extract funds from their customers with increased interest rates. American investment bank JP Morgan suggested that ‘significant increases in the cost of loans are on the way’. A spokesperson added, ‘The slowdown in demand for loans and lending are likely to put additional pressure on the economy and lead to more credit quality deterioration’.

Amongst the banks most likely to raise interest rates are Barclays, Lloyds TSB and RBS, who each need to raise around £10 billion, with Lloyds in particular need of extra capital following its multi billion pound takeover of HBOS . As the credit crunch continues to display the extent to which the financial market can have knock on effects on either side of the Atlantic, UK lenders are likely to come under increased pressure following the growing number of US lenders nearing bankruptcy .
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