The Bank of England says its funding for lending scheme will take time to significantly impact on lending volumes, after figures revealed net lending grew by just £0.5bn in Q3.
Banks and building societies drew £4.4bn of loans from the scheme in Q3.
The amount was £0.5bn up on the previous quarter and now covers 35 lenders and 80 per cent of UK lending to the real economy.
The scheme works by reducing funding costs for banks and building societies, which allows them to reduce the price of new loans and increase their net lending.
The Bank says funding costs have fallen but this will take time to feed through to lending volumes, given the typical lags involved in the loan application, approval and drawdown process.
Bank of England executive director for markets Paul Fisher says: “Since the scheme was announced we have seen widespread falls in funding costs across different sources and an equally wide variety of lending rate reductions.
“But it is too early to use these data as a reliable indication of the impact of the funding for lending scheme on lending volumes.”
Platform Black chief executive officer Christopher Shaw says: “The scheme has reduced the banks’ funding costs, but on this early evidence it has done little to encourage them to lend.
“Net lending increased by just £0.5bn in the quarter in which the scheme launched – a fraction of the amount hoped for.”
Frontline Analysts chief executive officer Darren Sharma says funding for lending is better than other schemes such as Project Merlin, but the big lenders are not using it to lend.
He says: “The Bank of England suggests that more time is needed because applications and approvals for borrowers take time – well, they do not take that much time these days.”