Credit Providers Reduce Borrowing Limits

Posted 2007-11-20

Many consumers, even those with a good record of repayment, are seeing a reduction on their credit card spending limits as companies respond to the current global financial crunch. 

The “Daily Telegraph” reports that spending limits are being “slashed.”  Financial services provider Goldfish told the paper it had cut limits for some of its customers. 

Problems in the sub-prime mortgage sector in the US ushered in the most recent crunch as an increasing number of homeowners defaulted on their loans.

Several major financial institutions bought into this debt, and the defaults left them with the potential for staggering losses.  In response, banks raised the rates at which they lend to each other.  The impact of this tighter credit has been felt at the highest financial level. 

Experts anticipate further turmoil in the international credit market.  The performance in global stocks yesterday indicates that the repercussions will be felt for some time. 

The FTSE index in London suffered its largest decline since August on news that investment bank Goldman Sachs was predicting large losses for rival Citibank due to losses in the sub-prime market. 

Citigroup shares dropped 6 percent yesterday in response.

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