BoE says lenders expect to expand supply of credit to households, businesses

Thu Apr 3, 2014 4:30am EDT

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LONDON, April 3 (Reuters) - British lenders expect the availability of mortgages and business loans to pick up significantly in the second quarter of this year, a Bank of England survey showed on Thursday.

The central bank's quarterly Credit Conditions Survey showed demand for secured lending by households - essentially mortgages - rose in the first quarter, although the pace of growth eased from a survey record high in the fourth quarter.

"The expansion of availability was reported to be driven by an improvement in the economic outlook and increased appetite for risk on the part of lenders," the Bank said.

"Lenders expected the availability of secured credit to increase further in Q2."

The BoE also said there was a large increase in the availability of secured loans with a high loan-to-value ratio of above 75 percent.

And willingness to lend at ratios above 90 percent rose at the fastest pace since the BoE first asked the question in the second quarter of last year.

BoE Governor Mark Carney and other officials have played down suggestions that the housing market is overheating, and recent data have pointed to tentative signs of moderation in Britain's booming housing market recovery.

Growth in British house prices cooled for the third straight month in March, despite recording their biggest annual rise in almost four years, data from mortgage lender Nationwide showed on Wednesday.

And British mortgage approvals slowed in February by more than expected, possibly reflecting bad weather during the month, and there was another contraction in business lending.

Thursday's survey showed spreads on mortgage lenders narrowed a little in the first quarter, with respondents expecting only them to tighten only slightly next quarter.

The Bank refocused its Funding for Lending Scheme away from mortgage lending and dedicated it exclusively to business lending at the start of this year.

The BoE said credit availability to businesses increased for a sixth straight quarter, with lenders citing an improvement in the economic outlook.

"A higher proportion of loan applications from small businesses were accepted in 2014 Q1, continuing the trend of positive balances seen in recent quarters," the BoE said.

"There was a little change in acceptance rates for medium-sized companies and large corporates."

BoE data on Monday showed lending for businesses continued to decline in February, although the pace of contraction eased.

The BoE survey, which started in 2007, was conducted between Feb. 7 and March 3. (Reporting by Andy Bruce and Lavinia De Luca)

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