Banks plan to raise mortgage and corporate lending

LONDON Thu Jan 3, 2013 9:31am GMT

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LONDON (Reuters) - British banks plan to significantly increase the availability of mortgage and corporate lending in the first quarter of 2013, a Bank of England survey showed on Thursday.

The central bank's quarterly Credit Conditions Survey also found that banks reported record rises in the supply of those types of credit in the final quarter of 2012. Banks cited the BoE's Funding for Lending Scheme as one reason for the increase in mortgage lending.

The BoE opened the new programme in August to ease credit conditions. The FLS offers banks and building societies cheap finance if they increase lending to businesses or households.

BoE data showed early last month that British banks and building societies drew down 4.36 billion pounds from the FLS in its first two months, in what analysts said was a moderately encouraging start.

The central bank and many British politicians say that a shortage of business and mortgage lending may be a major reason for the slowness of the country's recovery from the financial crisis.

According to the survey, banks also expected a significant further tightening in spreads on mortgages in Q1 after a big squeeze in Q4.

Spreads on lending to large and medium-sized firms had tightened substantially in the three months to early December, but remained broadly unchanged for small firms, the poll showed.

(Reporting by Olesya Dmitracova and Dasha Afanasieva)

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