New SME lending fees still on the rise
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According to the latest Bank of England lending trends survey, the flow of net lending to UK businesses remained negative in August. It says that while some UK businesses have lenders admit spreads and fees have risen on new lending.
The Bank admits that lending to small business improved significantly from July, up to -£0.8bn from -£15.4bn, but it says businesses think equity and bond markets currently provided more attractive sources of external finance than bank borrowing.
The report says: “Longer-term retail funding costs - such as rates on fixed-term deposits - were reported to remain elevated relative to Bank rate or Libor, and were expected to remain so for some time.”
The report also revealed that total net mortgage lending rose in August, with the annual rate of lending growth edging upwards for the first time since September 2007.
Net monthly flow for residential loans was £1bn in August, up from -£0.2bn in July 2009. The Bank says spreads remain high in mortgages, but lenders expect them to fall in the coming months.
The report says: “Looking forward, a net balance of big lenders in our survey expected credit availability to rise somewhat over the next three months. That was largely driven by perceptions of an improved outlook for the economy and house prices.
“Lenders’ appetite to lend may also be supported by the reduction in default rates reported in that survey, though defaults were still expected to rise further.”
Council of Mortgage Lenders director general Michael Coogan says: “Funding conditions remain challenging, despite the encouraging signs of a slight thaw in wholesale funding markets. Today’s report very much confirms our own assessment of market prospects - the most likely scenario is a slow and long-drawn out recovery.”
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