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BoE deputy governor calls for authorities to boost credit availability

Bank of England deputy governor Paul Tucker has called for more direct intervention from central authorities to ease credit conditions for borrowers.

Speaking at the Investment Property Forum’s Alastair Ross Goobey memorial lecture in London yesterday, Tucker (pictured) said the Government and the Bank of England should consider what more they can do to ease credit conditions for borrowers.

In February, BoE governor Mervyn King’s stated it was the role of the Government to intervene when it comes to directly easing credit conditions, rather than the bank.

In contrast, Tucker, a favourite to replace King as governor, believes the bank should look at what more it can do. He said: “An event [eurozone break up] with low probability but gigantic impact affects bank funding costs. This is gradually being passed on into lending rates for firms and households.

“The banks themselves did not bring about the underlying challenges facing the euro area. Given the costs to our economy, the authorities, including the bank, need to consider what more we could do to alleviate tight credit conditions in the UK.”

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  1. Households, unlike busineses dont actually have to borrow money. They may want to but it is not a necessity. So here’s is a novel thought – dont try. Instead save the money and put off the car purchase until you have saved enough for it, dont build the extension unless you have the cash to do it, dont buy the new kitchen – yours isnt really that bad, save up for it. For too long we have been the “I want it now” society instead of waiting until its affordable and by it for cash. Once the purchase has been made, start saving a regular amount again. Once the banks see a dramatic drop off in demand for loans they wont take long to start dropping their rates for those who just cant save. They will end up with huge deposits but very few people to lend them to. These deposits lose them a fortune if they pay interest on them but cant cant charge more for loans as the demand simply isnt there. Its not rocket science – its just supply and demand.

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