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Bank lending to business forecast to rise for time since financial crash

03 Aug 2015

Bank lending to businesses is expected to rise this year for the first time since the financial crash, new figures suggest.

According to the EY Item Club, businesses borrowed £103.4bn from banks in the first half of 2015, up from £88.6bn in the same period last year.

While experts say this year’s rise is likely to equate to a modest 0.25%, they predict that by 2019 business lending could be 25% higher than last year.

Bank lending peaked at £575bn in 2008 and has fallen steadily since.

‘With the economy growing at a steady pace and business investment set to rise at an annual average of 6.5% over the next three years, the forecast suggests that the days of lending contraction are in the past,’ said the group.

Mortgage lending is also predicted to rise this year as the housing market continues to strengthen.

Lending to home buyers is expected to climb at an average of 3.8% a year until 2019, while the total amount of outstanding mortgage loans is forecast to reach £1.3 trillion.

Andrew Goodwin, senior economic advisor to the EY Item Club, said: ‘With homeowners set for the sixth year running of historically low borrowing costs, the demand for mortgages should continue to grow healthily, albeit at a far from spectacular pace.

‘But while a low interest rate environment is good news for consumers, the prospect of a further year of squeezed interest margins is not what the banks were hoping for’.