Bloomberg News

U.K. Secured Loans to Households Jumps on BOE Credit Program

September 26, 2012

Secured credit to U.K. households rose “significantly” in the latest three months and a further increase is expected, thanks to the Bank of England’s Funding for Lending Scheme, the central bank said in a report today.

A gauge of availability rose to 21.9 from minus 4.1 in the second quarter, the central bank in London said in its credit conditions survey. The index of expected supply in the fourth quarter was 36.1.

The Bank of England opened its Funding for Lending Scheme at the beginning of last month with the aim of getting the economy moving by boosting credit to companies and households. The bank said yesterday U.K. lenders may be able to borrow an initial 61 billion pounds ($98 billion) under the program.

“Lenders commented that the Funding for Lending Scheme should help to improve the availability of secured credit to households,” today’s report said. “One element of the increase in availability was an expected tightening of spreads on secured lending to households over the next three months” after a widening in the latest three months.

Unsecured credit to households was predicted to increase “slightly,” although companies will see no change in the amount available, the bank said.

Lenders reported that demand for prime loans for buying homes had increased “slightly” in the latest period and was expected to continue to do so in the coming quarter, according to the survey, which was conducted between Aug. 14 and Sept. 4.

Credit Program

Under the Funding for Lending Scheme, a bank can initially borrow treasury bills valued at 5 percent of their outstanding loans, plus any expansion of its lending during a reference period from that date to the end of 2013.

The program is aimed at reducing the cost of borrowing and is the latest in a series of measures introduced to help the economy fend off contagion from the turmoil in the euro area. Banks have been able to borrow treasury bills from the Bank of England since Aug. 1 to fund lending into the economy, and the central bank has said its new lending plan could boost credit to companies and households by at least 80 billion pounds.

Lenders said demand for credit from small and large companies had fallen and was expected to remain unchanged in the fourth quarter. Demand from medium-sized firms was unchanged and was predicted to increase slightly in the coming period.

To contact the reporter on this story: Svenja O’Donnell in London, England at

To contact the editor responsible for this story: Craig Stirling at

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