BOTH mortgage lending and loans to small businesses slid last month, in the seventh month of the Bank of England and Treasury’s flagship funding for lending scheme (FLS), which is designed to boost credit in the economy.
The total amount lent out in mortgages fell a further £100m after January’s £400m dip, according to figures released by the British Bankers’ Association (BBA) yesterday.
And lending to businesses crashed, the numbers showed, despite claims the FLS would soon start to impact credit markets, after seven months of disappointing numbers.
Businesses outside the financial sector secured £1.8bn less credit in February, following on from an average £1.3bn drop in each of previous six months the FLS has been in action.
This meant high street banks had £286.5bn out on loan to companies, compared to £305.4bn for the same month last year.
“The renewed and appreciable drop in net lending to non-financial companies in February reinforces concern that the FLS is so far failing to have any material impact in lifting bank lending to companies,” said IHS Global Insight’s Howard Archer.
“About the best that can be said is that the monthly drop in lending averaged £847m in the first two months of 2013, which is essentially half the average monthly drop of £1.65bn in 2012.”
But Archer was bullish on house prices, citing a strong labour market, sagging interest rates and improved credit conditions against the 2013 worsening in the mortgage numbers coming from the BBA.