Boost in lending but risk appetite remains low
BoE report reveals positive impact of Funding for Lending Scheme over the three months to December 2012.
Borrowing to potential homeowners and larger businesses had “risen significantly” in the three months to mid-December 2012, according to the latest Bank of England quarterly credit conditions survey, with lenders predicting a further “significant increase” over the coming months.
The Funding for Lending Scheme was widely cited as contributing towards the increase in secured and corporate credit availability. Lenders expected a further increase in the availability of credit to all sectors over the coming quarter.
Lenders noted that the FLS had been an important factor behind this increase, consistent with a reported easing in wholesale funding conditions pushing up significantly on credit availability. Market share objectives had also contributed significantly to the increase in credit availability.
The rise in credit availability was spread across borrowers at loan to value ratios above and below 75 per cent, and some lenders commented that the supply of credit to first time buyers had risen.
However, aggregate credit scoring criteria remained broadly unchanged, suggesting that lenders were unwilling to increase risk appetite beyond current scoring criteria. Some lenders even said they expected to tighten credit scoring criteria slightly, reflecting their desire to ensure that any increase in lending would adhere to risk appetite.
The availability of secured credit was expected to increase significantly further in 2013 Q1, again driven by market share objectives and a slight continued easing in wholesale funding conditions, as well as, for some lenders, increased appetite for risk. The increase in availability was expected to occur across LTV ratios.
This follows on from the Royal Institution of Chartered Surveyors’ recent housing survey report, where the institute admitted that the FLS is “beginning to bear fruit for potential buyers”. However, it warned that the macro economic picture continues to weigh heavy on the market and continues to prevent any really significant boost in activity.