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Now The Banks Are Lending Even Less: Mortgages Hit Ten-Year Low And Loans To Small Firms Are Worse Than 6 Months Ago

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http://www.dailymail.co.uk/news/article-1313661/Bank-lending-small-businesses-falls-fifth-month-row.html#

Banks were last night warned that they must start lending to small businesses or face swingeing new taxes.

Bank of England figures showed that small business lending remains in crisis and firms are still paying back billions more than they are advanced.

It is the fifth month in succession that business lending to small firms has contracted.

The situation is worse than six months ago, when banks handed out £300million more in loans than was repaid.

In another sign that banks are failing to make cash available, mortgage lending has plunged to a tenyear low, leaving millions desperately struggling to find a home loan.

Gross mortgage lending plummeted 14 per cent in August.

Yesterday Business Secretary Vince Cable read the riot act to the banks.

He said: 'I really do hope the banking community is listening. There is a potential train crash ahead.'

His warning echoes the Daily Mail's campaign, Make the Banks Lend, which has highlighted the desperate plight of thousands of small firms, with around 500 collapsing every week. Between July 2009 and July 2010, firms paid back to banks £47billion more than they received in new loans.

But this a sign that big firms are paying back their loans, and too little is being handed out in new money.

In comparison, during the second half of 2008, when Britain's economy was shrinking, the banks handed out £12.5billion more in loans to business than they received in repayments.

Speaking at a fringe meeting at the Liberal Democrat conference in Liverpool, Mr Cable contrasted multi-million pound bonuses with the failure to lend to Britain's 4.7million small and medium-sized firms.

Mr Cable said there was a 'compelling case' for new taxes if banks do not change their behaviour, predicting there would be an 'enormous kick back' from his ministerial colleagues who would be 'on the warpath' over the issue.

He said: 'We [have] made it very clear that we were very concerned about the way the banks were performing in relation to lending to small and medium- sized enterprises. We spelt out that there were what we called sticks and carrots.

'One of the sticks is in relation to tax measures. It remains an option, particularly if the banks decide to spray out lots of money on bonuses and dividends at a time when small businesses are being starved, then the case for taking action is a compelling one.'

Deputy Prime Minister Nick Clegg added that the Coalition is 'working flat out to get the banks lending again to small businesses', which he described as 'the lifeblood of our economy'.

He added that the existing banking levy, which will be introduced in January 2011 and will apply to the balance sheets of big banks and building societies, is expected to be worth around £2billion a year.

Lord Oakeshott , the Lib Dem Treasury spokesman, said: 'Frankly they [the banks] are not lending as they should.

'The problem we've had in this country is we've gone from feast to famine. The banks were lending far too much, now they're lending far too little.'

The Daily Mail's campaign has revealed the desperate plight of thousands of small firms.

It was launched in July after Bank of England governor Mervyn King said he was deeply saddened by the impact of the banks' behaviour on small firms.

He recalled 'heartbreaking' stories that he regularly hears from entrepreneurs struggling to survive, or expand their business, following poor treatment by their bank.

Yesterday's 'Trends in Lending' report from the Bank said the situation is getting better for big companies, but has not changed for their smaller counterparts.

It said: 'Contacts of the Bank's network of Agents noted that while credit conditions were easing for larger businesses, they remained tighter for smaller firms.'

To make matters worse, the interest rates that big businesses are being charged are dropping, but the rates are unchanged for small firms.

The findings are echoed in a separate report from the manufacturers' organisation, the EEF, which was published yesterday.

It has witnessed a 'modest improvement in the supply of credit and the availability of new lines of borrowing', but the trend has been 'concentrated' among medium and large companies.

The EEF warned: 'Some small firms [are] still facing constraints in accessing finance.'

Lee Hopley, chief economist, said: 'Despite the pick-up in the economy, too few companies are seeing a significant improvement in lending conditions.'

John Walker, chairman of the Federation of Small Businesses, said firms are 'still facing an uphill struggle'.

He warned: ' Demand for finance is at its highest as the economy enters recovery, something which the UK economy is tentatively moving through.

'If the Government truly believes that the private sector is going to help avoid a doubledip recession, it needs to consider alternative sources of finance.

'Small firms don't have a huge amount of scope in accessing finance, unlike larger businesses.'

It is calling for more competition in the banking sector, which it hopes will encourage greater competitiveness through lower charges and better availability.

The British Bankers' Association insists its members are doing their best to help small firms at this difficult time.

A spokesman said: 'The UK's banks have established a taskforce to report to the Government on exactly this issue - addressing how banks can further help small businesses through the recovery.

'We absolutely agree with the Government that small businesses are vital to securing the economic recovery and have committed to offering every assistance to viable businesses.'

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Thanks Vince. As we as taxpayers own the banks, doesnt that mean that the government (aka we the people) will pay extra taxes to lend those taxes to ourselves at a grossly inflated rate given the base rate?

Its about time business and the population learnt to live in their means and only borrow for emergencies.

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When banks lent out shed loads to small business they weren't lending to business at all - they were lending against property held directly or indirectly by the business owners.

The banks have been myopic and dysfunctional for years. Two years ago was a good opportunity to get rid of a good number of them and start again, Opportunity missed, now we are stuck with these shysters. Cable back the bailout, a leopard doesn't change its spots and all this talks of action is ballcocks.

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When banks lent out shed loads to small business they weren't lending to business at all - they were lending against property held directly or indirectly by the business owners.

The banks have been myopic and dysfunctional for years. Two years ago was a good opportunity to get rid of a good number of them and start again, Opportunity missed, now we are stuck with these shysters. Cable back the bailout, a leopard doesn't change its spots and all this talks of action is ballcocks.

I second that.

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I see that the comments appear to have disappeared from:

http://www.dailymail.co.uk/news/article-1313586/Mortgage-lending-plummets-10-year-monthly-low-housing-market-remains-exceptionally-weak.html

Or have I got the wrong article?

Edit:

Ah, just seen the thread about all the comments disappearing.

Edited by The Masked Tulip

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course, the problem is not lack of lending...its lack of BORROWING.

might sound like two sides of the same coin, but the reasons at each end are different.

for a business to borrow..he needs to decide if the 10K, 100K 1m is likely to produce 11K, 110K 1.1m.

If it doesnt, then he wont borrow.

the other reason for borrowing is to finance overcosts not covered by cash flow...cite..the government, Ford, GM, or any other bankrupt organisation.

the first reason is sound.

the second reason is unsound.

funny enough, banks know this...however, a company heavily into reason 2 has no choice but to keep borrowing...or redundancies follow...thats when the politicians get involved and bleat that GDP is going suffer UNLESS we do something...trouble is, ITS ALREADY TOO LATE. The damage was done at the FIRST LOAN used to support the firm. It would have been better to change the business AT THAT TIME...small beer, later, anf 3 for 5 years of more loans, the company CANT change sufficiently to pay the loans...it is bust...100%...then we get the AIG, the FORD, the GM, government bailouts....and STILL the DEBT remains....

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Thanks Vince. As we as taxpayers own the banks, doesnt that mean that the government (aka we the people) will pay extra taxes to lend those taxes to ourselves at a grossly inflated rate given the base rate?

Its about time business and the population learnt to live in their means and only borrow for emergencies.

I would point out that a major feature of capitalism is that savings are lent out to enterprises to make capital investments and hence more money..

And there is nothing wrong in principal with using a mortgage to buy a house.

The problem is when credit is handed out like candy to be spend on consumable items, when businesses become a property fund with side activities in making stuff, and banks put more effort into trading derivatives with each other than doing boring things like analyzing business plans and assessing borrower creditworthiness..

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I would point out that a major feature of capitalism is that savings are lent out to enterprises to make capital investments and hence more money..

And there is nothing wrong in principal with using a mortgage to buy a house.

The problem is when credit is handed out like candy to be spend on consumable items, when businesses become a property fund with side activities in making stuff, and banks put more effort into trading derivatives with each other than doing boring things like analyzing business plans and assessing borrower creditworthiness..

there is a problem with lending on houses....it makes bankers compete for the same security...that makes them lend even more and the house value goes up.

homebuyers are caught in the crossfire.

And anyone who denies this just needs to read the financial reports of mortgage firms....they are going GROWTH,for MARKET SHARE...that means competing over the finite supply of ASSETS on which they will lend.

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course, the problem is not lack of lending...its lack of BORROWING.

might sound like two sides of the same coin, but the reasons at each end are different.

Bump. This story never got a mention on HPC from what I can tell. Banker's want people who want to borrow for business to put up security for the debt!? The horror. Probably still less viable demand to borrow, just the divs who think borrowing and debt is free money, together with more lender caution. Vince showing signs of his recent reported misgivings over HTB2.

It's from June 2013, following on from Daily Mail's MAKE BANKS LEND campaign, as per the 2010 original starter post for the thread.

Probe into why firms can't get loans: Banks investigated for first time in a decade after claims some small businesses can't even open current accounts

OFT probe is a sign of the long-running crisis facing small firms

Complaints about rip-off charges and high interest rates on loans

Investigation is victory for Mail's 'Make the Banks Lend' campaign

..Asked if the Funding for Lending Scheme, the Government's latest attempt to solve the problem, will cure the problem, he said: 'Well, it isn't at the moment.'

Mr Cable added: 'It is overwhelmingly targeted at the mortgage market which is frankly where we don't need more demand.'

Net lending - which is the total amount of money handed out by the banks minus the amount paid back by firms - has mostly been in negative territory since the financial crisis began.

The latest figures, from the Bank of England, reveal two of the biggest culprits are Lloyds Banking Group and Royal Bank of Scotland, both bailed out by taxpayers.

Since last summer, their net lending has collapsed by a total of nearly £11billion - £6.6billion for Lloyds and £4billion for RBS.

Following on from 2012, with King wanting banks to try to find businesses who want to borrow. Mortgages & BTLs. HTB1 and HTB2 at high prices, strangling money to spend, other than for mostly tightwad older people who get higher prices for their homes, and landlords who don't tend to spend lots of higher end furnishings and fittings for their rented properties.

http://www.independe...ng-7900005.html

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Bump. This story never got a mention on HPC from what I can tell. Banker's want people who want to borrow for business to put up security for the debt!? The horror. Probably still less viable demand to borrow, just the divs who think borrowing and debt is free money, together with more lender caution. Vince showing signs of his recent reported misgivings over HTB2.

It's from June 2013, following on from Daily Mail's MAKE BANKS LEND campaign, as per the 2010 original starter post for the thread.

Following on from 2012, with King wanting banks to try to find businesses who want to borrow. Mortgages & BTLs. HTB1 and HTB2 at high prices, strangling money to spend, other than for mostly tightwad older people who get higher prices for their homes, and landlords who don't tend to spend lots of higher end furnishings and fittings for their rented properties.

http://www.independe...ng-7900005.html

I suspect Vince has plans for RBS as a state investment bank - if he's back in the cabinet in 2015.

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Thanks Vince. As we as taxpayers own the banks, doesnt that mean that the government (aka we the people) will pay extra taxes to lend those taxes to ourselves at a grossly inflated rate given the base rate?

Its about time business and the population learnt to live in their means and only borrow for emergencies.

????

Money only comes into existence via loans. No loans = no money.

I won't go into the detail but without more loans continually being made the system collapses.

Your post is argued from a moral not economic or monetary point of view. From those your post is nonsensical.

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Some interesting business customer comments on the RBS site regarding borrowing.

http://www.rbs.com/n...ing-review.html

Thanks for that. No real demand, and all too often what demand there is, desired by zombie business in contracting sectors where risk of high failure rate when forbearance ends. 26 year old businesses, some run by people who have the better houses that have experienced decades of HPI, still wanting 'pittyful' working capital loans.

With younger people being squeezed all the time having less money to spend on products businesses sell, with student-debt, renting, Shared-Ownership/HTB1/2 on very expensive terms. Leaving younger people with less money and very vulnerable when mortgage rates rise.

"We are the biggest lender to SMEs in the country, and have identified £20 billion in surplus deposits that we want to put to work to support the economy - but we constantly hear that businesses can't get the finance they need. We have to bridge this gap. "With the economy now moving to recovery, it is the right time to have a fresh look at lending, to make sure we are making the right judgements, to challenge ourselves to get better and support even more businesses.

"Demand for lending remains a challenge, but we want to do more than just wait for demand to materialise. We want to play our part in securing the recovery. If there are loans that we could and should be making, but are not, then that will change. If there are things we can do better - we will."

When are we going to wake up to this bank swindle. My 26 year established business with good security is waiting for an RBS decision on a pittyful 30K working capital loan, the application got 'lost in the system' they have taken the cheap freely printed money from Central bank and stuffed it under the mattress for there greedy future whilst pretending to be interested in lending. At current interest rates who are you kidding RBS. Wake up and cloud fund - you don't need them.
Edited by Venger

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Guy with cashflow difficulties on multiple businesses. Aww. What a success; starting up or expanding 3 businesses, over 25 years, with £multi-million turnovers, that run into cash-flow difficulties. Of course the guy at the top wants to be kept at the top with banks lending him money to survive, instead of selling breaking up 3 businesses, and selling them cheap (good lending debt) to 3 younger competitors.

My experience. Asked about a 75k mortgage/loan on airfield business with 1m assets an no loans/finance etc. Branch no help. Business Banking Direct said they have a 25k max. Another advisor would call. She did. Then said she would get someone local to call. Have never heard a dicky bird and that was two months ago!

My impression. Staff seem to think/act like they are not lending. They should be grabbing a deal like this - 7% LTV - with both hands if they were really being motivated. So the message is not getting through. Either a lack of leadership from the top, or the leaders really do not want to lend.

If it's the airfield I think it is on a search of his name, wonder if some of the £1m security is also the fancy home which appears to have recently been built on it. Grand Designs said to have filmed the house during construction. Are many younger people coming through into the system going to have funds for buying or renting microgliders to fly about in, after renting their homes, trying to save deposit, or over-paying via SO/HTB1 or 2. Maybe it's just going to be a pursuit for older people over the years to come, if they can get younger people to overpay via HTB2.

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????

Money only comes into existence via loans. No loans = no money.

I won't go into the detail but without more loans continually being made the system collapses.

Your post is argued from a moral not economic or monetary point of view. From those your post is nonsensical.

well, apart from the Billions in QE.

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Thanks for that. No real demand, and all too often what demand there is, desired by zombie business in contracting sectors where risk of high failure rate when forbearance ends. 26 year old businesses, some run by people who have the better houses that have experienced decades of HPI, still wanting 'pittyful' working capital loans.

With younger people being squeezed all the time having less money to spend on products businesses sell, with student-debt, renting, Shared-Ownership/HTB1/2 on very expensive terms. Leaving younger people with less money and very vulnerable when mortgage rates rise.

Those comments do at the least explain why the Government does not want to be in banking. It doesn't want the bad press from the nasty decisions that need to be made.

Re bank lending, I don't think the banks are as stupid as some people think. The governments policy on banking is pretty schizophrenic. On the one hand it wants banks to lend to fuel recovery and prevent businesses going under. Then the next minute when the public sector are asked to stump up for the consequences it's "reckless lending by the evil banks" time again.

My guess is the banks pretty much ignore what the government says as it can't be relied on and just do their own thing anyway. Of course some of the banks have more leeway to do this than others ...

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Re bank lending, I don't think the banks are as stupid as some people think. The governments policy on banking is pretty schizophrenic. On the one hand it wants banks to lend to fuel recovery and prevent businesses going under. Then the next minute when the public sector are asked to stump up for the consequences it's "reckless lending by the evil banks" time again.

My guess is the banks pretty much ignore what the government says as it can't be relied on and just do their own thing anyway. Of course some of the banks have more leeway to do this than others ...

Schizophrenic, and banks hopefully still ensuring all loans made are viable, whilst good-risks wary of borrowing.

"Demand for lending remains a challenge, but we want to do more than just wait for demand to materialise. We want to play our part in securing the recovery. If there are loans that we could and should be making, but are not, then that will change. If there are things we can do better - we will."

Just with Carney's speech today, I'm thinking it's more of a scheme that allows for a cushion for a future crunch, than any real push for new lending, however much they'd like velocity up.

http://news.sky.com/story/1159278/mark-carney-announces-liquidity-boost

Though the overhaul itself is unlikely to be noticed by bank customers, policymakers hope that it will help encourage lenders to provide more cash for those who want to borrow.

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"A.N. Other

A.N. Other July 3, 2013 8:29 AM

I am just waiting for the complaint website. I will be pointing out how RBS ruined me, for being straight and honest about business being quiet. They responded by pulling my facilities without any discussion and demanding repayment there and then. RBS have destroyed my business and how they think I can now find the money to repay I don't know."

Your business was quiet, and the bank foreclosed? Shocking!

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  • 140 Brexit, House prices and Summer 2020

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      • down 5% +
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      • Even
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      • up 5%



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