Credit Crunch Forcing Increase In Loan Rejections

Mon, 12 Nov 2007

UK banks are tightening their lending criteria and making borrowing "tougher" for UK consumers as interest rates continue to rise in wake of the credit crunch.

Acceptance rates for loans fell in the six months to October, while a number of providers are pulling out of the market altogether, according to statistics from financial website moneysupermarket.com.

The finance group said approved applications had fallen to just 52 per cent last month, down from 67 per cent in April this year, despite the number and quality of applications remaining constant.

The increase in the number of people being turned down for loans is in line with the number of people being rejected for credit cards, with 17 per cent more people having credit card applications turned down in the six months to the end of September than during the previous six months, according to figures from website MoneyExpert.com.

Tim Moss, head of loans at moneysupermarket.com, said: "Clearly some people who should be offered loans aren't getting them at the moment."

"Loan acceptance rates are decreasing, showing that now, more than ever, providers are looking for lower-risk customers to help reduce the chances of having bad debts on their books ."

Moss added that a combination of higher payments on mortgage loans, soaring petrol prices and winter energy bills would make things even "tougher" in the short term.

Meanwhile financial information group Moneyfacts.co.uk said three providers had been forced to pull out of the personal loans market altogether during the past week, while other providers continued to raise their rates .
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