Lack of credit ‘hurting economic recovery effort’

The lack of willingness among money lenders to offer credit deals to British consumers is damaging the effort to improve the national economy, it has been suggested.

According to the deputy governor of the Bank of England Sir John Gieve, there is a degree of caution among creditors to accept credit applications and the situation is making the economic slowdown more severe.

And despite the serious problems many people are having in becoming debt free, Sir John maintains that the fundamental aspects of the British economy are strong enough to make the reluctance to lend unnecessary.

“The pricing of risk in credit markets seems to have swung from being unsustainably low last summer to being temporarily too high relative to fundamentals,” he said.

Since the start of the credit crunch last summer, the Bank of England has reduced the base rate of interest on three occasions in an effort to boost the economy, including most recently in April 2008.