UK banks expect fall in demand for loans

Major British lenders expect household and business demand for loans to slow after last month’s vote to leave the EU, the Bank of England has said, in another sign the economy may be slowing.

Based on conversations with lenders after the June 23 vote, the central bank said banks expected businesses large and small to delay new investment and company takeovers.

Lenders also expected households’ demand for mortgages to fall over the next three months, despite a sharp rise in the run-up to the referendum.

The bank publishes a survey of banks’ attitudes to lending every three months.

The data in the survey released yesterday were collected between May 23 and June 10, but the central bank also included extra material based on conversations after the referendum.

Appetite for loans from large firms had slowed significantly before the June 23 referendum, but demand for lending from smaller firms increased in the three months to mid-June, the survey showed.

Demand for mortgage lending in the second quarter rose to its highest level since the first three months of 2015, but banks expected growth to slow in the third quarter even before the referendum.

The central bank reported enthusiasm for credit card lending and other unsecured loans also rose before the vote.

The bank took steps last week to ensure British banks keep lending as the financial consequences of the decision to leave the EU began to materialise, lowering the amount of capital banks must hold in reserve.