HEY, WAIT, SUBPRIME ISN'T SUPPOSED TO INCLUDE ME!:

Bad news for consumers as banks squeeze credit even further: Latest figures suggest Britain is heading for recession and prompt calls for half-point cut in interest rates (Julia Kollewe, 10/02/08, guardian.co.uk)

The availability of mortgage lending and credit lines to consumers and businesses worsened more than expected over the past three months, according to the Bank of England's latest credit conditions survey, published today. The amount of unsecured loans on offer to households hit a new low as the global credit crisis deepened.

Default rates rose and banks said they expected defaults on all lending to increase further over the next three months.

"It's only going to get worse from here," said Paul Daley at Capital Economics. "Perhaps the worst aspect is that this survey excludes the dramatic events of the last few weeks – it was conducted from August 26 to September 17 - so credit conditions will probably tighten by even more than expected. Even if the problems in the financial markets were miraculously solved overnight, which is unlikely, the impact of the credit crisis on the real economy will be with us for some time."

A balance of 27.5% of lenders offered fewer unsecured loans to households in the third quarter, the lowest level since the series began. Mortgage lending was even scarcer: a balance of 39.3% of lenders reported a fall in mortgage lending to consumers, albeit fewer than the 47% in the previous quarter.

Businesses are also being hit. The balance of lenders reporting a fall in credit availability to firms rose to 36% from 32%. And again, lenders expect to cut credit to firms further.

"The survey highlights the vicious circle that now is at work, with banks cutting back on lending to companies and households because of the worsening economic outlook, a reduced appetite for risk and reduced availability of funds," said Saunders. "In turn, the reduction in the supply of credit exacerbates the downturn – which will reinforce the reluctance of bank to lend in coming quarters. It is notable that banks report that reduced investment spending is a major factor in the downturn in demand for credit from companies."