Banks made virtually no new loans to real estate companies in April and May, according to the Bank of England, revealing for the first time the extent of the funding crisis facing the industry.
The Bank also said that lending to all businesses fell by its biggest amount in nearly nine years in April and that high street lenders had reported this trend had continued in May. Mortgage approvals by major UK lenders picked up to 45,000 in May, from 42,100 in April, the Bank’s Trends in Lending report showed.
The Government will be concerned that credit flows to cash-starved firms are getting weaker despite record low interest rates and a £125bn asset-buying programme aimed at boosting the economy. Net lending to private non-financial corporations fell by £5.4bn in April – the biggest fall since June 2000.