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FXstreet.com (Barcelona) - Vicky Redwood, Chief UK Economist has noted that the BoE´s latest Credit Conditions Survey has provided further evidence that the positive impact of the Funding For Lending Scheme is building and the beneficial effects are spreading to the corporate, as well as mortgage, market.

She states that a net balance of 26% of lenders reported a rise in the availability of secured credit over the past three months. This was an even higher balance than reported last quarter, which was already the highest since the survey began in 2007. Redwood comments that a similar net balance is expected to raise availability further in the next three months.

Also, for the first time, the survey showed an improvement in the availability of credit to the corporate sector too with the net balance reporting an increase over the past three months was some 29%, with a further expansion expected in the next quarter. Also, she notes that the spreads on lending to both households and firms had tightened significantly and were expected to fall further. Although lenders planned to raise the average credit quality on new mortgage lending, they expected an increase in maximum loan to value ratios.

Redwood continues to explain that the FLS was widely cited as contributing to these improvements. The initial usage of the scheme was quite modest, with figures published ast month showing that banks accessed only £4.5bn of cheap funding in Q3 (out of the £70bn initially available to them). But this survey suggests that firms intend to make greater use of the scheme.

However, she feels that we should not get too carried away too soon. Whether Banks actually follow through on these intentions to boost credit supply is another thing. Furthermore, even if banks make more credit available, firms and households may not want to borrow more. She notes that while demand for household credit was reported to be improving, demand for corporate credit was expected to remain subdued.

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