Lending Down But More Loans Being Approved

Although lending to businesses of all sizes fell in the three months to February, year-on-year, the £500m decline represented a marked improvement on the annualised £3.3bn drop in the previous quarter.

According to the Bank of England’s latest Trends in Lending report, lending was down 2.1 per cent in February. However, the study also found that pricing on loans to small and medium-sized enterprises (SMEs) has remained “broadly unchanged” in recent months.

A spokesman for the Federation of Small Businesses said that this underlines the ongoing challenges faced by small firms in meeting their growth ambitions. He added that, as the economy continues to gain momentum, ensuring small firms have access to finance is critical.

However, a spokesman for the British Bankers’ Association (BBA) said that despite net lending being down, a higher proportion of loans were being approved, adding that, with seven out of 10 applications for business finance being approved, there has rarely been a better time to approach a bank.

The report also showed that the rates being offered to mortgage borrowers on five-year fixed-rate deals are continuing to edge up slightly. The average rate on offer for a five-year fix for someone with a 25 per cent deposit has edged up from 3.34 per cent in January to 3.45 per cent in February and 3.47 per cent in March.

For someone with a 5 per cent deposit looking for a five-year fix, the average rate has climbed more slowly, however, from 5.44 per cent in January to 5.46 per cent in March.

Meanwhile, separate research shows that around 25 per cent of London’s small businesses looked at alternative ways to raise finance in the first three months of this year, up from 16 per cent a year earlier.