Quantitative easing fails to unblock banking system
Mortgage and business lending slump in May despite Bank's £125bn injection
- guardian.co.uk, Monday 29 June 2009 18.49 BST
- Article history
Britain's banking system remains largely frozen, according to figures released today. They showed that mortgage lending has slumped to a record low and business lending has also dropped.
Economists said the figures showed the Bank of England's £125bn "quantitative easing" scheme was not yet delivering any real boost to the economy.
The Bank's own figures showed that net mortgage lending fell to just £324m in May, the weakest figure since the current series of data began in 1993. And new mortgage approvals – seen as a reliable guide to where house prices may be heading in the coming months – remained steady at about 43,000 in May, breaking the rising trend of recent months. The figures are at only about half the average level of the past 15 years.
The Bank also said that lending to companies fell by £300m in May, following another drop in April.
"Although quantitative easing only started in early March, one might have hoped for more positive signs and the figures show that the extra liquidity pumped into the banking sector is not yet filtering through to households and company bank balances," said Philip Shaw, chief economist at Investec bank. "It is difficult to see a sustained recovery unless credit conditions improve."
Other indicators
Other figures showed that the construction sector remains on its knees as the latest activity barometer from the Construction Products Association fell to zero for the first time ever.
"The sale of construction products continues to decline despite talk of 'green shoots' in other parts of the economy," said CPA's spokesman, Noble Francis.
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