Bank use of Funding for Lending surges but business loans drop

USE OF the Funding for Lending Scheme by banks surged in the last part of 2013, with nearly half of the borrowings made so far coming in the year’s final quarter.

Banks drew down £18.79bn in the final three months of the year, out of £41.92bn in the six quarters the scheme has been active. Unlike previous quarters, the majority of banks eligible to do so made use of the scheme. Nationwide and Barclays made the largest drawings, hitting £6bn each, while RBS made a net repayment of £750m.

The Bank of England also said that the number of mortgages approved by banks has now swelled to the highest levels since 2007, before the financial crisis, but net business lending dropped again.

In January, 76,947 mortgages were issued, up by over 4,000 since December. The number of new mortgages has grown by around 50 per cent in two years. Figures are still well below the lending peak at the end of 2003, when over 130,000 approvals were made some months.

But total lending to individuals dropped from £2.29bn in December to £2.08bn in January, and lending to non-financial business dropped by £623m, after even larger falls in December, November and October.

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