The economy of England is showing conflicting signs as there are certain aspects spelling progress while the rest is still far from full recovery. For instance, the collapse in the business lending industry coupled with a weak month for the mortgage market has strangled the flow of credit recently. The Bank of England revealed in a report that the flow of loans to corporations shrank by a couple of billion pounds as of August of this year. Meanwhile, the Council of Mortgage Lenders said that a 10% decline in home loans has been experienced as well.
Both reports push England’s Bank and Treasury to boost its efforts of lending using the Funding for Lending scheme. To add to the external sources of funds not just by businesses but also by individuals, those offering bad credit loans have also increased in number. With efforts coming from the government and the private sector, expectations are high that the UK can pull out of the recession that its economy currently experiences.
However, reports coming from the Bank and Treasury show that the rate with which it has been lending to businesses falls short by 3.1 percent as of the end of the fiscal year. The hardest hit remains to be the smaller firms since they were unable to obtain credit due to their inability to submit all requirements. Credit scores, years in the business and the nature of the business continue to be repeatedly checked and rechecked and it is this very meticulous process that prevents small to medium entrepreneurs from getting the loan they need.
A representative from the British Chamber of Commerce said the statistics confirm the people’s uncertainty towards the state of the UK economy. This is regardless of the fact that the banking sector seems to continue to deleverage in order to keep the total cost of credit down.
At present, the Bank and Treasury has no complete data on the number of loans given by third party lenders to businesses and individuals as there has been no concrete move to keep track of the online lending industry.
UK Mortgage Market Experiences Decline
Along with the decline of loan applications, the UK is also experiencing a decline in the mortgage market. As of September, the CML has reported a decline of about 11.6 billion in mortgage alone. It’s understandable since gross lending for remortgaging and mortgages for house purchases, but not repayments, have also gone down.
The CML chief economist has explained that a lot of the reduction seems to reflect a weaker house sales activity. And that in part can be attributed to the fact that homeowners will now have to pay about 23,000 pounds more just to live in a market town. Hence, owning a home has become a luxury that not everyone in England can afford.
Though the lending industry in the UK seems to be rather weak as of the end of the current fiscal year, there is still a lot of reasons to continue being hopeful for the year ahead. If economic analysts are right, both the lending and mortgage industry should be back on track soon.