Bank survey says borrowers face looser credit conditions

Ben Southwood
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CREDIT conditions loosened up in the third quarter of the year, according to a survey from the Bank of England released yesterday.

The availability of secured credit to households increased significantly in the three months to September, lenders told the Bank of England – in fact it was the largest reported increase in credit availability since the survey was first carried out in 2007.

According to respondents, the loosening was concentrated on borrowing at loan to value ratios (LTVs) higher than 75 per cent – sure to be a relief for a segment of the market that has been tightly squeezed over recent months.

Analysts suggested the Funding for Lending Scheme (FLS) was finally delivering easier credit to consumers.

“The increase in availability of secured credit for borrowers requiring higher LTVs is a positive sign, pointing to an easing of lenders’ affordability criteria,” said LMS boss Andy Knee. “Lending for house purchases looks set to grow over the next quarter, boosted by FLS.”

But the picture wasn’t all positive, as the availability of corporate loans shrunk to a yet more negative position – from minus 3.2 in the second quarter to minus 5.5 in the third.

Citi analyst Michael Saunders said that while this result was negative, the data should be taken with a pinch of salt, noting that the index increased in 2010 without feeding through to cheaper borrowing for firms.