US sub-prime fallout cuts credit limits across UK

Posted 2007-11-20

The ongoing global financial crisis is tightening the limits on the amount consumers are being allowed to charge on their credit cards.

Borrowing limits for historically good paying customers aren’t being spared either, and many are being “slashed” by providers, according to the Daily Telegraph.

Joining the mix of frightened lenders, credit card provider Goldfish admitted to the newspaper that it had cut limits for a “small number” of card users.

This rolling calamity began with the collapse of the sub-prime mortgage sector in the US – causing many socio-economically challenged mortgage holders to default on their monthly payments.

As lenders swiftly foreclosed on thousands upon thousands of homes and properties, it quickly emerged that many major financial institutions had previously purchased some of these sub-prime debts; and would subsequently face great losses with the sector’s collapse.

As a result, banks raised the rates at which they were willing to lend to each other, in a credit squeeze which is now being felt at the highest levels of the street.

Further credit turbulence is highly anticipated in the future, with the volatile behaviour of the global stock markets yesterday demonstrating that the fallout from the ongoing crisis will continue for some time.

London’s FTSE index experienced its biggest drop since August after investment bank Goldman Sachs predicted big losses for rival Citigroup as a result of the sub-prime collapse.

Citigroup, whose shares dropped 6% yesterday as a result of the forecast, had been highly exposed to the US sub-prime market.

Leave a Reply