The Bank of England has warned of an extended squeeze on household incomes, saying the worsening eurozone crisis had made it more expensive for banks to raise money and UK borrowers could suffer from higher interest rates as a result, writes The Times.
In extraordinarily blunt words, Sir Mervyn King, the Bank Governor (pictured), said that Britain had been forced to put in place contingency plans as the eurozone was showing signs of “tearing itself apart.”
His stark outlook came as recriminations flew across Europe, with David Cameron discarding normal diplomacy to concede for the first time that the eurozone could well splinter.
“It either has to make up or it is looking at a potential break-up,” the Prime Minister told MPs.
In a speech today, Cameron will vow to keep Britain safe during “perilous economic times” and issue a staunch defence of the Government’s austerity drive amid signs voters are losing faith with its pace and scale.
“Now, more than ever, this is the time to stand firm,” he will say as he remakes the case for the Government’s approach to cutting the deficit.
Nigel Stockton, financial services director at Countrywide, said that issues in Europe were preventing banks from lending: “Since November last year, lenders have been closely monitoring their sales volumes by imposing stricter lending criteria and new restrictions, making it harder for new borrowers and homeowners looking to move off un-capped Standard Variable Rates (SVR) to access funds with competitive rates.
“We would speculate that the continued issues within the eurozone leading to increased wholesale funding and other liquidity issues are all playing a role in preventing the banks from lending.
“With the two largest lenders already declaring their intentions to reduce their market share, it is clear that there is little appetite to increase mortgage lending at a time when millions are looking to fix their rate.”
