Lending to households and businesses continued to pick up in the final three months of last year and is expected to rise further in the coming months, the Bank of England said yesterday, boosting hopes that its scheme of quantitative easing is working.
The Bank’s latest quarterly Credit Conditions Survey, which asks lenders about credit conditions over the past three months, showed that the availability of credit to businesses rose for the fourth consecutive quarter between October and December, while the availability of mortgages rose after falling in the third quarter.
Howard Archer, chief UK and European economist at IHS Global Insight, said: “The survey at least boosts hopes that quantitative easing and other policy measures undertaken by both the central bank and the Government to boost bank lending are increasingly feeding through to have a beneficial impact, in tandem with the modestly improved economic situation and outlook.”
However, the data showed that the rate of improvement in credit conditions for businesses slowed, with the gauge for availability of credit falling from 24.8 in the third quarter to 16.3.
Alan Clarke, UK economist at BNP Paribas, said: “Things are getting better, but at a slowing pace.”
Access to finance was still most difficult for smaller businesses, the survey showed, with the gauge of availability of credit at 1.9 in the fourth quarter.
Respondents to the Bank’s survey also said that conditions for mortgage borrowers were more favourable, particularly for those customers looking to borrow more than 75 per cent of their property’s value.
The Bank said that the number of higher loan-to-value mortgages was expected to continue to rise this year, although at a moderate pace.
This will come as welcome news for first-time buyers, who have been hit hardest in the fallout from the financial crisis, as mortgage credit seized up and deals for those who had a deposit of less than 15 per cent virtually disappeared.
Recent figures from the Council of Mortgage Lenders showed that the average person buying their first home with a mortgage put down a record 25 per cent of the property’s value during the past nine months.
The cost of credit is also expected to fall this year. “Spreads in general were expected to narrow over the next three months,” the survey said.
Spreads have widened dramatically over the past 18 months, reflecting a surge in borrowing costs for banks and a reluctance to lend to all but the safest of borrowers.
But consumers hoping to spend more on credit cards, or take out personal loans, will find little improvement. Lenders continued to tighten their credit scoring criteria and credit card limits in the fourth quarter and intend to continue doing this in the coming months.
The survey showed that the rise in business lending had been supported by increased competition from capital markets, while banks and other lenders were more willing to advance mortgages because of the improving economic outlook and the recent rises in house prices.
“[This] raises hopes that credit conditions will increasingly become less of a constraint on economic activity over the coming months,” Dr Archer said.
From The Times
Gráinne Gilmore and Francesca Steele
Howard Archer, chief UK and European economist at IHS Global Insight, said: “The survey at least boosts hopes that quantitative easing and other policy measures undertaken by both the central bank and the Government to boost bank lending are increasingly feeding through to have a beneficial impact, in tandem with the modestly improved economic situation and outlook.”
However, the data showed that the rate of improvement in credit conditions for businesses slowed, with the gauge for availability of credit falling from 24.8 in the third quarter to 16.3.
Access to finance was still most difficult for smaller businesses, the survey showed, with the gauge of availability of credit at 1.9 in the fourth quarter.
Respondents to the Bank’s survey also said that conditions for mortgage borrowers were more favourable, particularly for those customers looking to borrow more than 75 per cent of their property’s value.
The Bank said that the number of higher loan-to-value mortgages was expected to continue to rise this year, although at a moderate pace.
This will come as welcome news for first-time buyers, who have been hit hardest in the fallout from the financial crisis, as mortgage credit seized up and deals for those who had a deposit of less than 15 per cent virtually disappeared.
Recent figures from the Council of Mortgage Lenders showed that the average person buying their first home with a mortgage put down a record 25 per cent of the property’s value during the past nine months.
The cost of credit is also expected to fall this year. “Spreads in general were expected to narrow over the next three months,” the survey said.
Spreads have widened dramatically over the past 18 months, reflecting a surge in borrowing costs for banks and a reluctance to lend to all but the safest of borrowers.
But consumers hoping to spend more on credit cards, or take out personal loans, will find little improvement. Lenders continued to tighten their credit scoring criteria and credit card limits in the fourth quarter and intend to continue doing this in the coming months.
The survey showed that the rise in business lending had been supported by increased competition from capital markets, while banks and other lenders were more willing to advance mortgages because of the improving economic outlook and the recent rises in house prices.
“[This] raises hopes that credit conditions will increasingly become less of a constraint on economic activity over the coming months,” Dr Archer said.
From The Times
Gráinne Gilmore and Francesca Steele
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