"The rise in net lending to SME's in June fuels hopes that banks are now becoming more prepared to lend to small businesses as the economic environment looks brighter"
- Howard Archer, UK economist at IHS Global Insight
Lending to small and medium sized firms rose at the fastest pace in two years in June, adding to signs that credit conditions are ameliorating for SMEs. The Bank of England said that lending to non-financial SMEs increased by 238 million pounds in June compared with the average monthly decline of 500 million pounds over the past six months. It was also the third monthly gain and the biggest since May 2011, when the records began. Overall lending to non-financial companies shrank by 1.3 billion pounds in June.
Nevertheless, U.K. mortgage approvals fell in June despite the government's and central bank's efforts to ease credit conditions, the BoE said on Monday. The number of loans approved for house purchases declined more-than-expected to 57,667 in June from 58,071 a month earlier, against analysts forecasts of a rise to 59,500 in June. The data shows that mutual lenders are no longer able or willing to expand the size of their mortgage books. It is projected that mortgage demand is likely to continue to modestly recover in the coming months in response to the decline in mortgage rates and signs of improvement in the nation's economy. The government has sought to help home buyers through its Help-to-Buy scheme, which was implemented in April, and the Funding for Lending scheme run jointly with the central bank.
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