UK credit scheme helps mortgage hunters, not businesses
By David Milliken
LONDON (Reuters) - A central bank scheme to revive lending in recession-hit Britain is boosting the availability of mortgages but has not yet benefited businesses, a survey by the bank showed on Wednesday.
The Funding for Lending Scheme (FLS) was launched by the Bank of England and the government at the start of August, partly in response to criticism that the bank's main stimulus program - the purchase of UK government bonds - had failed to unblock credit for households and small businesses.
Many economists believe Britain will inch out of recession during the current quarter - a stance reinforced on Wednesday by encouraging retail sales data - but the government is still under pressure to create tangible economic growth.
The central bank's quarterly Credit Conditions Survey showed the biggest increase in mortgage availability since the survey started in 2007, and that banks planned to boost this by a further record figure in the coming three months - in part due to the FLS.
But economists will want to take a close look at August lending figures from the BoE due on Monday to see if banks' intentions to lend are being matched by actions.
"We will have to watch whether the improvement in the survey is actually reflected in mortgage lending spreads and quantities in coming months," said Citi economist Michael Saunders.
Lenders said in the survey that they had no plans to increase loans to business, and expected a small rise in corporate defaults over the next three months.
"FLYING START"? Continued...