The Banks behind the lending boom are now hindering the recovery of the financial system by being too cautious with their money. This has lead to a warning from The Bank of England stating that banks need to spend more of their cash in order to alleviate the credit crunch.
Their latest Financial Stability Report firmly accuses banks of being overly cautious, and that they are refusing to lend any more money in fear of further credit crunch losses. However this spending is needed in order to speed up the recovery of the UK financial system.
The housing market has been seriously hit by the credit crunch, with the number of mortgages decreasing and an increase in the cost of lending. The Bank of England further estimate that mortgage approvals are at an all-time low, falling an average of 44% from the previous year.