Improving Housing Market May Boost U.S. Credit, IMF Reports

The improving U.S. housing market may help small and medium-sized businesses obtain more loans, as those enterprises often use housing as collateral, the International Monetary Fund said.

The IMF had previously said that U.S. small and medium enterprises, also known as SMEs, didn’t benefit as much as large corporations from relaxed financial conditions and expanding corporate markets, because their options are usually limited to bank loans with real-estate collateral.

“The improving housing market may improve access to finance for SMEs given that they often use housing as collateral,” the IMF said in a chapter of the Global Financial Stability Report released today.

The Washington-based IMF also praised the Federal Reserve’s purchases of mortgage-backed securities as contributing to improving liquidity in the mortgage market.

“The constraints that the U.S. corporate loan market witnessed in the early stages of the crisis appear to have dissipated,” the IMF said. “Both supply and demand factors have improved since then, and total credit growth to non-financial corporations has turned positive.”

Weak growth in credit is considered one of the main factors in the slow economic recovery. While many countries are boosting credit creation by very accommodative monetary policies, some require additional actions to increase loan volumes, the IMF said.

Japan should increase the availability of risk capital for startups through asset-based lending, according to the IMF.

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