Business lending rises - but slowly

BoE said that lending to businesses has risen - but slowly

Lending to credit-starved businesses has not risen as fast as hoped for during the past three months, the Bank of England has said.

Its latest Credit Conditions Survey said overall credit availability to business had increased in the three months to mid-June, "though by less than expected".

The report dampens hopes of a swift thawing in lending conditions after the Bank's more optimistic survey in April.

Lenders expect to increase loans to households and firms over the next three months due to cheaper and more available funding, as well as pledges by part-nationalised Lloyds Banking Group and Royal Bank of Scotland as conditions of taxpayer support.

But the spread, or margin, on corporate and household lending rose during the period - making them dearer - and survey respondents expect a further widening in spreads on business loans ahead.

The Bank highlighted that a small balance of lenders has increased slightly the availability of secured loans such as mortgages to households since March.

Lenders said they were also expecting a further rise in credit availability over the next three months, supported by higher risk appetite.

"Credit availability to high loan-to-value borrowers was expected to improve and lenders anticipated a slight easing in credit scoring criteria for granting loan applications.

"The economic outlook was expected to bear down less on credit availability over the next three months," the report said.

But the survey struck a further gloomy note in reporting that lenders had clamped down further on credit card loans, seen rising default rates, and were braced for more bad debts in the months to come.