Credit crunch easing says Bank

A glimmer of hope amid the financial gloom has emerged after the Bank of England said the credit crunch was finally showing signs of easing.

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The Bank's governor, Mervyn King, said that liquidity in the financial system had improved and mortgage rates were beginning to come down as the logjam in wholesale money markets freed up.

However, he added that it was only 'low risk' borrowers, who had money put aside for deposits, who were seeing the benefits of the lower rates.

Borrowers with no or low deposits were continuing to find it costly to secure home loans with nervous banks still clamping down on more risky lending.

"It's the riskier borrowers who are finding it more expensive," Mr King said. "The credit crunch hasn't had an enormous effect on those people who are saving to borrow."

The Bank released figures earlier this week which revealed that two-year fixed rate mortgages for those with a deposit of 25% of the property value had fallen in price for the first time since February.

Data on two-year fixed rate mortgages at 95% loan-to-value was not released, for the third month in a row, due to the lack of home loans on offer for those with lower deposits.

Copyright © PA Business 2008

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