Lending to businesses and house buyers is on the rise

Lending to business increased slightly last month as mortgage lending returned to levels not seen for two years.

Figures from the British Bankers' Association today showed banks lent £200 million more to businesses in November than they received back in repayments.

The BBA also said 44,713 mortgages were approved for house purchase last month, up more than 150% on a year ago and level with the figure in November 2007 shortly after the collapse of Northern Rock.

It was welcomed as a sign that the credit crisis choking the economy may finally be starting to ease. However, analysts warned lending was still sharply down on pre-credit crunch levels and a long way off where it needs to be to drive a sustainable recovery in the economy.

The rise in mortgage lending by banks disguised the total collapse of loans approved by building societies. Lending to business in November was an improvement on the previous month when firms repaid £800 million more than they received in new loans.

Net lending over the past six months has averaged minus £1.4 billion as businesses pay off debts and banks rein in new lending.

However, the majority of the lending to businesses went to the commercial property sector.