New lending to home buyers and other consumers rose at a faster than expected pace in November as the government's Funding for Lending scheme contiunes to boost credit growth in the UK economy.
Mortgage approvals reached 54,036 in November, the Bank of England said in its monthly Trends in Lending report published Friday, a gain of nearly 1,000 from the previous month and the highest since January of last year. Net mortgage lending fell slightly, by £200m, owing to the lag time between loans and approvals. Credit to consumers also expanded by 0.1 percent, the BoE said, from a net decline of 0.3 percent in October.
Broad money supply, defined as cash circulating in the real economy but outside of banks and financial firms, fell by a surprise 0.2 percent on the month and 2.8 percent from November of 2011. The monthly decline was the largest since June, the BoE said.
The BoE said Thursday that British banks are set to significantly increase lending in the coming months as the government's programme to boost credit into the UK's moribund economy appears to be gaining traction and gradually replacing quantitative easing as its preferred tool in monetary policy.
- FOLLOW IBTIMES
The quarterly Credit Conditions Survey said banks increased lending to households and small businesses "significantly" in the three-month period ending in the middle of last month and that its poll suggested more loans would be made available in the first three months of this year.
"The availability of secured credit to households was reported to have increased significantly in the three months to mid-December 2012, driven in part by the Funding for Lending Scheme," the Bank said. "A further significant increase was expected over the next three months. Demand was generally expected to increase over the next quarter, except in the cases of credit card loans and lending to large businesses."
The Bank, along with the UK government, launched its Funding for Lending (FLS) scheme on 1 August with the aim of allowing below-market borrowing by participating banks, provided those banks commit to passing on that borrowing to the broader economy.
Around 30 banks, with around £1.3tn in outstanding UK loans, had signed up to the programme by the end of October. Based on FLS rules, which allow banks to tap the fund for five percent of their outstanding loans, the Bank had around £66bn in new funds to provide for the final two months of the year and into 2013.
"The Funding for Lending Scheme was widely cited as contributing towards the increase in secured and corporate credit availability," the Bank said.
To report problems or to leave feedback about this article, e-mail:
To contact the editor, e-mail:
This article is copyrighted by IBTimes.co.uk, the business news leader