Credit Market Analysis by Lloyds TSB

Government expands measures to boost the flow of lending, but sovereign risk rises Credit conditions are still tightening, as lending growth slows Credit conditions for households and companies have tightened further.

Government expands measures to boost the flow of lending, but sovereign risk rises Credit conditions are still tightening, as lending growth slows Credit conditions for households and companies have tightened further. The Bank of England’s latest credit conditions
survey shows about a net 30% of banks tightened mortgage, unsecured and corporate lending in Q4. Lending in Q1 2009 was expected to be tightened further still, especially in unsecured lending, as chart a shows, reflecting falling risk appetites among lenders and concerns about the outlook for house prices, economic growth and default rates.

Moreover, the survey shows that, for the corporate sector, demand for credit was also weak, reflecting lower capital investment intentions and M&A activity, but respondents reported strong demand for credit for balance sheet restructuring, while drawdowns of previously committed credit lines remained strong (chart b). Official statistics show mortgage lending growth has fallen to around 4%, while growth in unsecured lending and non-financial corporate lending have slowed to about 5%.

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