UK house prices are still continuing to rise, increasing by 0.7% during September, despite turmoil in the global financial markets and the resulting crisis at mortgage lender, Northern Rock, reports The Times.
Figures released today by Nationwide, the building society, show that British house prices rose from 0.6% in August when the credit crunch began to impact worldwide markets.
Fionnuala Earley, chief economist at Nationwide, said: “The financial turmoil that began in early August extended into September, dampening hopes that the uncertainty sparked by the crisis would blow over quickly.”
THE BANK OF ENGLAND’S £10BN auction of funds turned out to be a non-event yesterday as no bank took up the offer of three-month liquidity, reports The Independent.
The news was greeted as positive but the credit crunch continued to play out as lenders tightened corporate lending.
The Bank offered the three-month funding to the market yesterday morning. Banks had half an hour to bid for funds at a rate of at least 6.75% – well above the rate at which banks lend to each other.
The three-month London inter-bank offer rate (Libor) dropped to 6.32% yesterday, its lowest since 10 August.
Industry sources said the lack of take-up was good news but that it did not mean no institution was feeling strain.
The potential stigma of being identified as the borrower at a penal rate had made it almost inevitable that no one would bid. “Who wants to sit on the naughty chair?” one top-level banker said.
BUSINESSES ARE FACING A FURTHER tightening of credit conditions in the months ahead as the economy’s good times fade abruptly, a gloomy survey from the Bank of England showed yesterday, reports The Times.
The report into expectations of banks and other lenders pointed to a “significant” retrenchment of credit in the final quarter of the year for business borrowers.
It was published as official data revealed that, before the worldwide credit squeeze hit last month, the economy was growing even better than originally thought, thanks to the strongest growth in corporate profits for 12½ years.
Lenders responding to the Bank’s first quarterly Credit Conditions Survey forecast that the terms on corporate loans would worsen.
They said that they would have to raise spreads and fees, impose stricter covenants and raise their collateral requirements.
Lenders have cut the availability of corporate credit in the third quarter, and the Bank said that it expected to have to reduce credit “significantly” over the next three months.
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