British banks are still refusing to lend and warning that credit will become even scarcer in the first three months of this year, despite Prime Minister Gordon Brown's call to free up credit, the Guardian newspaper reported on Saturday.
A Bank of England survey found that in spite of Brown's call for more loans, lenders had further reduced the amount of credit available in the last three months of 2008 and warned that they planned to continue to pare back.
Along with the quarterly survey was separate data on Friday which showed a record low for new mortgages being granted and figures from Halifax, Britain's biggest mortgage lender.
Halifax figures showed that house prices in December were down 16 percent from a year earlier.
Labour backbench MPs seized on the figures to put more pressure on Brown and Alistair Darling to take action to kick-start lending in the face of what economists warn could be a deep and painful recession.
Interest rates are already at a 58-year low and are expected to fall even further from their current 2 percent after Thursday's meeting of the Bank's monetary policy committee.
Despite a 37 billion pounds (about 54 billion U.S. dollars) bail-out package to buy shares in Royal Bank of Scotland and the soon-to-be-merged Lloyds TSB and HBOS, there are concerns that lenders are not heeding government demands to keep competitively priced loans available.
Options to the Treasury are thought to include injecting more cash into the economy and buying banks' "toxic" assets.
"As the chancellor has said, he is prepared to look at further measures to make it more likely that banks will lend, but banks have to understand that with billions of pounds of taxpayers' money invested, or being made available as a guarantee, the public and businesses are looking for something in return," a Treasury spokesman said.
Major banks claimed that they were heeding the government's demands to maintain lending. They put the blame on the departure of Icelandic and Irish banks from the market for the reduction in credit reported by the Bank of England.
Source:Xinhua
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