The Bank of England has extended the time period for the Funding for Lending scheme (FLS) and also allowed lending by non-bank mortgage lenders.
The Council of Mortgage Lenders (CML) welcomed the move. Paul Smee, CML director general, said: “It is helpful to have early confirmation that the FLS will be extended for a further year. This will minimise the risk of disruption to lending flows that might arise in anticipation of the closure of the scheme.
“We welcome the indirect extension of the scheme to non-bank mortgage lending too. Although non-bank lenders cannot access the scheme directly, any banks that lend to them will now be able to include that lending as eligible for inclusion in the FLS. This ought to result indirectly in the benefits of the FLS scheme being passed through to non-bank mortgage lenders.”[pullquote]The government is playing a risky game with the FLS: Brian Murphy, MAB[/pullquote]
“Business owners have every reason to celebrate today’s announcement, but I doubt many aspiring homeowners will be so enthusiastic,” said Brian Murphy, head of lending at Mortgage Advice Bureau (MAB).
“The FLS has helped to create some movement in the mortgage market over the last nine months, but its work is far from done.
“When the Chancellor first launched the scheme, he set out the aim of ‘making mortgages and loans cheaper and more easily available’ to families aspiring to own their own home. The consistent rate reductions on mortgage products have certainly helped. But so far it has been a select group of borrowers – typically existing homeowners or those with sizeable deposits – who have taken the lion’s share of incentivised funding.
“In fact, the average loan to value (LTV) for purchase mortgages in the first quarter of 2013 was actually lower than the same time last year. The Government is playing a risky game with the FLS by favouring business owners over mortgage borrowers, and we can only hope it does not dissuade lenders from pursuing greater volumes.”