Mortgage lending overcame gloomy forecasts for little change, with the overall availability of secured credit to households rising “significantly” over the summer months.
The increase illustrates that the £80 billion Funding for Lending scheme is having a positive impact.
The scheme, inaugurated by the Bank of England and the Treasury at the beginning of last month, aimed to boost credit flow to households and businesses.
The bank’s credit conditions survey published yesterday (26 September) brought more good news to the tune that mortgage availability is expected to increase further over the next three months.
Vicky Redwood, chief UK economist for Capital Economics, said: “Overall, the outlook for bank lending is better than it was a few months ago, helped by the latest policy initiatives.”
However, she added that getting credit flowing freely around the economy once again is likely to be “a long and slow process”.
Likewise, despite the increase in summer mortgage lending by banks and building societies, the Bank said this was an “early impact” of the scheme and warned that total lending could drop over the coming 18 months as a result of global monetary difficulties.
In addition, most of the mortgage lending was aimed at people with big deposits, and the overall availability of credit to the corporate sector remained stagnant for small, medium and large companies alike.
Ms Redwood said that the outlook for business lending was “less than encouraging”.
While the demand for and the proportion of loans approved for medium-sized companies is expected to increase, according to lenders, credit availability to the corporate sector is forecast to remain dormant.
The struggle to get on the property ladder and the consequent increase in rent has also sparked predictions that demand from people looking for a mortgage will rise in the coming months, especially buy-to-let mortgages.