A new UK lending survey shows banks sharply tightening credit to households and companies, intensifying worries that the government’s £500bn ($725bn) bank-rescue plan is failing to get money flowing into the economy, reports the WSJ. The Bank of England’s credit-conditions survey shows banks becoming increasingly conservative in lending practices, reducing maximum credit lines and cutting the size of mortgage loans as a percentage of home values. Banks said they were scaling back mortgage lending even as demand for new mortgage loans remained stable. The report highlights the challenge for banks as they try to recover from heavy losses while providing new loans to borrowers. It could also increase pressure on UK chancellor Alistair Darling to ask taxpayers and politicians to support more financial aid to banks.

This entry was posted by Gwen Robinson on Monday, January 5th, 2009 at 5:38 and is filed under Capital markets. Edit this entry.