Experts have warned today that British households are likely to be set for more financial pain, with interest rates likely to rise on their loans and mortgages.
Some of the UK’s top banks last night suffered a humiliating downgrade in their credit rating by the credit agency Moody’s amid rapidly increasing fears of a financial meltdown in Europe. The banks with downgraded credit ratings include Barclays, Lloyds and the Royal Bank of Scotland (RBS).
Because of the ratings the banks will have to pay billions of pounds more to secure their funds, unfortunately it is British families who will ultimately pay the rise as the banks look to recoup their money.
It wasn’t just UK banks that got their ratings trimmed, altogether Moody’s downgraded 15 of the world’s largest banks as it becomes more pessimistic about the credit-worthiness of banks. Some of the others downgraded are Bank of America, Citigroup, Credit Agricole, Deutsche Bank, Goldman Sachs, JPMorgan Chase and Societe Generale.
Richard Lloyd who is executive director of consumer group Which? said: ‘This announcement will also lead to speculation that it will cause a further rise in mortgage rates.’
‘For too long banks have taken advantage of the lack of competition on the high street to increase the interest rates charged on mortgages, loans and overdrafts, with over one million consumers seeing their yearly mortgage payments increase by over £300 million with the standard variable rate rises earlier this year.’
‘This is why we cautiously welcomed the Chancellor’s recent “funding for lending” scheme. But we want to see strong safeguards in place to ensure that banks pass on this cheap credit to consumers.’
Gary Greenwood from analyst Shore Capital said: ‘The UK banks are in a stronger position than their European counterparts – their liquidity and capital conditions are arguably better, but this proves that they cannot escape the problems in the Eurozone.’