MORTGAGE availability contracted during the third quarter of the year despite banks pledging to increase lending, Bank of England research showed today.
A small net balance of lenders reduced the amount of secured lending they did during the three months to mid-September, reversing an increase in mortgage availability seen in the previous quarter, according to the latest Credit Conditions Survey.
Lenders blamed the reduction on a deterioration in the cost and availability of funds, although they expect mortgage lending to improve in the final part of the year.
Part-nationalised banks Royal Bank of Scotland and Lloyds Banking Group have both made commitments on mortgage and business lending in return for taxpayer support.
RBS pledged to lend £25 billion this year, with the same amount committed next year. Lloyds is making £28 billion in total available in the next two years.
Both banks are placing hundreds of billions of pounds worth of toxic debts in a taxpayer-backed insurance scheme to restore their finances.
The credit conditions report added that credit availability for businesses had risen in the period, with a further improvement expected in the next three months.
Lenders are extending more loans to large and medium-sized companies due to the cheaper cost of funds, the Bank said.
The spread, or margin, on lending to medium and large sized companies rose between June and September but is expected to "narrow somewhat" in the next three months.