Lending to tighten on subprime woes

The US subprime crisis could herald tighter mortgage policies in Europe, analysts said.

The US subprime crisis could herald tighter mortgage policies in Europe, analysts said.

Retail lenders could be especially reluctant to grant 100 per cent loans on property purchases.

Arturo de Frias, chief banking analyst at Dresdner Kleinwort in London, forecast a "widening of spreads but that is good for the sector.

"There will be more differentiation between what is more and less risky. I think this a temporary disruption of the short-term part of the credit market, and I don't think it will have an impact in terms of the normal business for retail banks," said Mr de Frias.

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Although mortgage lending, fuelled by cheap money, has boomed in countries such as Spain, Britain, the Netherlands and Ireland, no European country has witnessed a US-style binge in lending to people without steady incomes or credit histories.

"In the United States you had an issue with excessively lax origination of mortgages," said an analyst with a major US bank in London. "Too much money was being offered to the wrong people."

Jean-Pierre Mustier, investment banking head of French bank Société Générale, told the Financial Timeslast night that although he expected a general credit squeeze to ease in coming months, credit would not be as easily available to borrowers as it had been in the last three years.