Banks Cut Amount They Are Willing to Loan

Mon, 07 Jul 2008

Britain’s banks have cut the amount they are willing to lend to borrowers in the face of the rising energy and food bills faced by consumers. Alliance and Leicester, HBOS and Abbey are amongst the major lenders to reduce the amount they are willing to lend, with homeowners now able to lend 12 per cent less than they would have been able to previously. The move is seen as a sign of caution by the banks, with banks keen to ensure that they do not lend borrowers more than they can afford to repay.

The news follows the findings of the latest Bank of England credit conditions survey, which revealed that banks are subjecting borrowers to stricter credit scoring as well as demanding larger deposits. It is the latest bad news for consumers, who have seen food prices increase by an average of 9 per cent in the last year, whilst energy bills and fuel costs have also risen.

The changes mean that it will be harder to get a mortgage, whilst those who are able to get a mortgage will be able to borrow less than they would have been able to borrow previously. For example, those earning in excess of £40,000 a year with no outstanding debt have seen the amount they can borrow cut from 6.25 times their income, to just over 5 times their income.
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