Lending to housebuilders down since the launch of Help to Buy

Kasmira Jefford
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LENDING to housebuilders has shrunk by 10 per cent in the last five months, despite the launch of the government’s Help to Buy scheme to stimulate activity in the new build housing market.

Net lending to residential construction firms has fallen from £4.64bn in March to £4.19bn in August, according to an analysis of Bank of England lending figures released today by law firm EMW.

Housebuilders have been major beneficiaries of government efforts to help homebuyers. However EMW suggests that smaller firms are being left out in the cold.

“Having played a key part in fuelling the last housing boom, lenders are being much more cautious about their exposure to the residential construction market, despite all the positive signs of growth,” EMW’s Simon Ingram said.

According to the firm, which started collecting data at the beginning of 2011, the fall since April is part of a longer-term trend that has seen net lending to construction companies for domestic building drop 42 per cent since its records began.

“The most likely explanation for this fall is banks’ reluctance to fund new lending to replace existing loans when they come to an end,” added Ingram.