Tesco Bank has become the latest lender to take advantage of the Bank of England's £80bn Funding for Lending scheme.
Living up to its supermarket roots Tesco, which has started to offer home loans for the first time, said it was calling on the BoE because it was low cost.
"The Funding for Lending scheme provides a cheaper source of funding than we normally have access to. By accessing the scheme we've been able to offer even more competitive mortgage products," a spokesman said.
Tesco has been joined in recent weeks by 16 lenders in flocking for the cheap BoE cash. This takes the total number of institutions taking part in the scheme to 30, representing close to 80 per cent of the UK lending market. Most of the latest tranche of lenders to join were small-to-medium-sized building societies but some big names, including the Co-operative bank and Clydesdale, have also come on board.
Under FLS, lenders can access funds at very low rates of interest as long as they commit to grow their net lending to business and consumers. All of the UK's big six high street banks have signed up to the scheme except HSBC, which can access the money markets with relative ease. The idea is that FLS could lead to as much as £80bn in extra credit being made available to British businesses and households.
There are signs that the scheme is beginning to have a positive effect on the lending market. Figures this week showed the strongest growth in consumer lending for more than four years, while approvals for home loans also topped the 50,000 mark in September. Nevertheless, the Ernst & Young Item club predicted this week that business lending will in fact fall in 2012, by 4.6 per cent to £429bn from last year, the fourth consecutive contraction in lending.
Yet FLS is unlikely to make a difference just yet, according to the Intermediary Mortgage Lenders Association. Peter Williams, IMLA's executive director, said: "The FLS is unlikely to make a significant impact on lending volumes until 2013 and to date it has only had limited effects on volumes and pricing, but this will build up over time."
With so many lenders signed up to FLS there is a growing feeling among analysts that the Bank may now hold fire on authorising another round of quantitative easing. The Monetary Policy Committee will meet next Thursday to decide whether or not more money needs to be injected into the UK economy to bolster growth.
Ross Walker, European economist at RBS, said: "The launch of the Funding for Lending scheme appears to herald the ascendancy of credit over quantitative easing, though evidence of improvement here remains tentative and anecdotal.