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Credit Crunch Effects Set to Ease, Says Bank of England

Credit Crunch Effects Set to Ease, Says Bank of England THE Bank of England has suggested that the next few months should see the worst effects of the global credit crunch begin to ease.

The Bank's deputy governor John Gieve said that the financial markets had undergone a "necessary correction" over the past year in his latest Financial Stability Report, arguing that the attitude to risk was "unsustainably low" up until the summer of 2007.

Although this was no longer the case, Mt Gieve said that the situation was now a mirror image of the previous one, as the level of aversion to risk was now "excessive."

"The most likely path ahead is that confidence and risk appetite will return gradually in the coming months," he predicted - although he stressed that this positive outcome was not a certain one.

If he is correct, however, the worst effects of the credit crunch would gradually wear off, and such increased confidence would improve the conditions in the lending and mortgage markets.

Royal Institution of Chartered Surveyors senior economist Simon Rubinsohn generally agreed with the Bank’s prognosis. He said that the housing market could experience a "modest pick up in activity" in the coming months, if the effects of the credit crunch ease.

Credit Check News posted on 08 May 2008

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