成人快手

The big freeze

• Robert Peston
• 29 Nov 07, 09:45 AM

The from and were the occasion for a modest sigh of relief.

They were the banks perceived by regulators and markets as most vulnerable to a hysteria-induced run caused by the debacle at Northern Rock in mid September.

But in extraordinarily challenging conditions in credit markets, they have succeeded in securing requisite funds from commercial sources 鈥� with A&L obtaining a jumbo two-year loan to cover maturing debts.

And although neither of them steered clear of the poison of structured credit, their losses from collateralised debt obligations, asset-backed securities and SIVs fall into the category of embarrassing and irksome, rather than life threatening.

Of the two, Alliance & Leicester has a bit more egg on its face from structured credit than its rival.

So far, so reassuring.

What about the outlook?

Well three-month sterling Libor has been climbing for the past fortnight and is back at almost 6.6 per cent 鈥� well above the Bank of England鈥檚 policy rate of 5.75 per cent. It means that funds for banks are both expensive and are still relatively difficult to obtain.

So Alliance & Leicester expects to lend less in 2008 and charge more for what it does lend.

It鈥檚 symptomatic of a new rationing of credit that will make most of us feel a bit poorer.

Interestingly, however, A&L doesn鈥檛 expect to be able to increase the interest rates it charges customers on mortgages and other loans quite enough to compensate for the rise in its cost of funds.

So its profits will fall.

Bradford & Bingley is more optimistic about future conditions in its core market of providing mortgages for buy-to-let purchases 鈥� although that optimism is based on the unprovable expectation that in a housing market downturn there will be an uptick in demand for rented accommodation.

Note that, according to the Nationwide, there was a sharp fall in house prices in October.

That decrease precedes the full onset of tighter credit conditions for all of us 鈥� although statistics published minutes ago by the Bank of England show that there was a sharp fall during October in both mortgage approvals and mortgage lending by British banks.

So it鈥檚 all reason enough to fear that we may be about to experience the most prolonged downturn in the housing market for 15 years or so.

The conditions in credit markets are a turbulent icy wind, wreaking sporadic damage and making us all feel colder and gloomier.

UPDATE 10:40 AM: The Governor鈥檚 statement to the Treasury Select Committee this morning is almost enough to make grown men weep. It says that the Monetary Policy Committee is expecting an unspecified period of rising inflation and slowing growth and that the outlook is 鈥渉ighly uncertain鈥�. Yuk.

Mervyn King also fears a further deterioration in money-market conditions as we approach the year end. He is particularly concerned about the possibility that short-term interest rates will spike relative to the policy rate.

So he has announced a new five-week liquidity facility to assure the big banks there will be enough cash in the banking system over the Christmas holiday period.

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