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The era of cheap loans may be over

According to the FSA the times of cheap loans and borrowing for british banks may be over. The chief exec predicts that the bank's use of complicated borrowing techniques and vehicles will be avoided and they'll revert to more trusted and less risky forms of borrowing. Some of the borrowing vehicles that banks had been using over recent years had become so complex that even the banks themselves didn't really understand how much risk they were taking on.

The deep water that Northern Rock found itself in was typical of the problems experienced by many UK wholesale borrowers and lenders, but Northern Rock just had a larger part of it's business exposed to these loans. The FSA has commissioned a report into the handling of the whole affair and it is expected to say that although the FSA was aware of the developing situation at the company, it failed to take action and force changes to be made.

Although this new report deals with how the FSA should have acted in working with the company, they are equally concerned now with how lenders treat their loans customers and want to ensure people borrowing money in these difficult times are treated fairly.

The FSA believe that we are unlikely to return to the cheap borrowing of the past few years that saw lenders borrowing billions of pounds and passing them on to borrowers , some of whom were never likely to be able to repay them easily.

One point of note is that the FSA now expects banks to build long term and more personal relationships with their customers, as they used to in the past, but times have changed radically since the advent of the internet and prospective borrowers have a whole host of options that simply did not exist a few years ago.

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