When will liquidity return to the consumer market?

The recent revelation that around 60% of UK bank loan applications are currently being rejected is a reflection of the difficult economic environment and a tightening of loan criteria by the banking industry. This has come at a time when many people are in need of short-term financial assistance to see them through the back end of the recession only to find that even if they have an almost perfect credit record they could be refused on historically irrelevant issues.

It is very much a chicken and egg situation with regards to liquidity returning to the consumer market because until the economy is stable and looking to grow in the future, it is likely we will see banks continue to operate on tighter criteria and rejecting more applications than they accept. At some point we will see the economy steady off and begin to grow, hopefully from a solid base, at which point we should then see an increase in liquidity and hopefully a lowering of rates and other finance costs.

It is bizarre to see UK base rates at 0.5% yet liquidity in the consumer market, and the business market, at uncomfortably low levels, however, hopefully this will change in the short to medium term!