Credit crunch on its fury
The effect of the ongoing credit crunch has been proved disastrous for borrowers and availability of loans has become difficult.
London (Shakespearefinance) January 21, 2008: The credit crunch prevailing in the UK financial market has come home to roost: rejected credit-card and loan applications have forced millions of Britons to delay key purchases for their dream houses.
The end of the easy credit era has had a devastating effect on retailers of big-ticket items such as sofas, with Land of Leather issuing a profit warning on Friday after orders plunged 25.5 per cent in two months. The Orders are now down 16 per cent since August.
'It's more difficult to get a loan approved and a lot of people felt they couldn't handle another monthly payment,' said Clive Hatchard, director of Land of Leather finance. According to him, near about one fifth of the customers buy suites on credit but the number has fallen to just 15 per cent during the sale. People did not have the money, or could not get it due to the ongoing credit crunch. Other financial surveys also support the fact. According to a leading financial agency, the number of credit card applications that were turned down rose from 2.7 million in the six months to March to 3.3 million in the six months to October. It was also harder to get unsecured loans in the UK, with rejected applicant numbers rising from 1.4 million to 1.9 million.
'There is a reduction in the available credit and even those borrowers with good credit histories were being rejected as lenders looked more closely at their ability to repay. Another matter of concern is the higher interest rate that is now charged on loans.
'We expect 2008 to record the softest consumer spending since 1992,' says Michael Saunders, chief UK economist at Citigroup. Economists and financial analyst are now warning that the UK economy faces a hard landing. The credit crunch has made the availability of loans a difficult task.
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