UK mortgage lending falls, says BoE

Mortgage approvals in the UK fell in January but businesses borrowed more, despite a rise in lending rates.

Data released by the Bank of England on Friday show the number of approvals for house purchases dipped to 54,719, compared with 55,632 in December, although the figure remained above the average level for the past six months.

The number of approvals for remortgaging fell to 25,573 – below the six-month average.

The BoE is attempting to revive the mortgage market through its Funding for Lending scheme, the government’s latest flagship initiative to spur credit creation.

Signs have emerged that the FLS is having an impact on the housing market, although it has so far had less of an effect on business lending.

The figures for FLS-specific borrowing, which includes both household and business lending, rose by £3bn – the first increase since the autumn and the largest upturn since September 2011.

The rise was driven primarily by an increase in business lending, which came in spite of higher borrowing costs for companies.

The rate on businesses’ outstanding loans rose 4 basis points to 3.12 per cent and the rate on new lending increased 14 basis points to 2.78 per cent.

The BoE hopes that the FLS will reduce the cost of borrowing for businesses and households, as well as making more credit available.

The BoE is due to release figures on use of the FLS over the past quarter on Monday.