Subprime crisis to bring $300bn losses

Thursday, 24 January 2008 12:00

Losses from the US subprime crisis could reach as much as £300 billion (£153 billion), with the credit crunch is set to continue.

Consulting firm Oliver Wyman's State of the Financial Services Industry report predicts "a stormy 2008" with "turbulent conditions" to continue into 2009.

With losses from the subprime crisis - where investments, based on mortgages to US borrowers with poor credit records, lost their value as loan default rates grew following interest rate rises - now thought to be at $100 billion (£51 billion), Oliver Wyman predicts further losses to hit £300 billion.

With banks expecting further losses, the credit crunch is set to continue and borrowing on the high street will be tougher.

Last year, the Bank of England's credit conditions survey showed lenders had made borrowing more difficult, and the Oliver Wyman points to this continuing.

The report also forecasts the slowdown in the European property markets - in particular in the UK and Spain - to continue, and food and oil prices are expected to continue rising.

Stock markets in Asia are set face falls in the coming year, with India and China suffering as the slowdown in the US economy has a knock-on effect across the world.

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