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
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.