Loans Get Tighter
Cristian Science Monitor has an article on how the recent turmoil in financial markets have made it difficult for ordinary people to access money. The article says that since the beginning of the month, lenders have tightened their standards. They are now very reluctant to make high-risk loans to individuals with spotty credit records. Banks have tightened credit standards because they want to protect their capital and their earnings. If they put a security [mortgage] on their books it trades at a lower value, they have to … take a hit on their earnings. The Bankwatch notes the irony of the situation. Those that suffer are not impacted by the sub-prime matter. Their personal circumstances have not changed one iota. This change is purely a reflection of tighter money markets, which drives up banks’ capital costs, and then the risk assessment and pricing groups re-calibrating their yields. Indian home loan customers were put through a similar wringer recently when the RBI stepped in to cool down the over heated Indian home loan markets.