Credit crunch shows its teeth

The last month has brought more evidence that the credit crunch is taking its toll on the real economy. Mortgage lenders have begun to raise their rates for existing customers as well as new customers. And some lenders have halted new mortgage lending altogether. As such, it is not surprising that house prices have continued to fall. It now looks likely thatthe credit crunch will trump inflation worries at next week’s MPC meeting. And we now expectinterest rates eventually to fall all the way to 3.5%.