Worsening of consumer credit crunch predicted by experts

1 October 2008

The ongoing crisis in the banking system will hit consumers hard, analysts have suggested.

Credit crunch conditions worsened significantly over recent days, with the government bailouts of five banks worldwide and the house of representatives' rejection of the US government's $700 billion rescue plan.

The collapse in confidence within the financial sector is now thought likely to hit Main Street - with businesses finding it harder to secure funding and consumers facing punitive loan, mortgage and credit card rates.

Speaking to CNBC, Rick Pendergraft, market analyst at Investor's Daily Edge newsletter, said: "If consumers can't spend and make acquisitions of goods, that's not going to help corporate earnings at this point in time unless they're doing a lot of business overseas."

Jim Bianco, president of Bianco Research, added: "The banking system now is simply too small given the size of the economy. There's not enough credit to go around now.

"So we ration out the credit and we do it through these very high interest rates."

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