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Are credit reports having a chokehold on lending?
With accusations that banks are being too reliant on credit reports from agencies that distribute the data of millions of British consumers, there have been concerns raised that the UK’s three credit agencies could have the chokehold on the future of the British economy.
This is due to the fact that despite Government targets that banks have been set for the amount of money that they should lend to their customers, some institutions like the Royal Bank of Scotland may not meet their targets, because there are too many people who have had missed payments or CCJs in the past.
Now - debates are rising as to whether the credit report system should be reviewed in order to make lending guidelines more lenient, and in order for the consumer to appear more favourably in the eyes of the banks.
Even though lending targets have been increased, the banks believe that the next year is going to be a difficult one for lenders. This is because of the fact that very few people are expected to apply for credit in 2010, as Britons try to reduce the number of financial commitments that they already have to deal with at the end of every month.
With credit reports being directly linked to how well mortgage lending is doing (due to the fact that most financiers will look at an applicant’s credit report before accepting or denying credit), there has been little surprise that there has been a 10% decrease in the amount of activity regarding new mortgages in the housing market amongst experts. One economist predicts that very little is going to change as we enter 2010.
Paul Samter also suggested that there were several green shoots that were finding their way into some areas of Britain’s credit situation, saying: "There has been a modest increase in the availability of mcredit recently, including some tentative signs of a few higher loan-to-value products emerging."
For the banks, the credit agencies, and the consumers, it is now a case of 'wait and see'. There is going to be no certainty about the future of the lending as Britain leaves the recession until time goes on. With there being many surprises in the statistics that have come through in 2009, finance experts are beginning to learn that nothing is predictable anymore when the UK economy is in a recession.