Banks and building societies to increase business and mortgage lending

03 April 2009 / by Rebecca Sargent
The UK's banks and building societies are expecting both business and mortgage lending to ease over the next three months, a report from the Bank of England has revealed.

According to the report into credit conditions, "a net balance of lenders reported that they were expecting a small increase in overall credit availability over the next three months."

This comes after the last report, which revealed that a net balance of lenders had been tightening their lending, with stricter criteria and reduced loans to mortgage customers with loan to value (LTV) ratios of more than 75 per cent.

The expected rise is the first since 2007, and coincides with the recent Nationwide Building Society house price index which saw an increase in residential property values of 0.9 per cent in March – the first rise since 2007.

According to the Bank of England, lending by banks and building socities is expected to increase, as: "Some lenders commented that they had not had enough time to assess the full impact on future lending of recently announced Government schemes to support the banking sector."

The report also found that demand for secured credit for house purchases declined less than expected over the last three months, although demand for such mortgage lending is expected to decline further still, as attractive standard variable rate mortgages remove the incentive to remortgage.

Meanwhile, lenders are expecting demand for small business credit to increase over the next three months.

Unsecured lending availability through credit cards and loans is expected to remain largely unchanged over the next three months as households battle to pay off existing debts.

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