The Funding for Lending Scheme Begins to Show Signs of Helping Borrowers.

by Mark Johnston

The Funding for Lending Scheme Begins to Show Signs of Helping Borrowers.

The funding for lending scheme was introduced by the bank of England  and was launched back in August 2012. This scheme allows financial institutions to borrow at a low interest rate with the expectation that they will in turn lend to more people and avert any further slowdown in the wider economy.

According to data recently published by the bank of England the scheme to encourage banks to ‘ramp up’ their lending has now added fuel to the housing market.

Meaning thousands of people should find it easier to obtain a mortgage and therefore buy a home in 2013.

It appears then that this particular initiative is helping to push down mortgage rates and lenders are poised for a further ‘significant’ increase in credit availability.

More lenders have entered in to the 85 per cent and 90 per cent loan to value (LTV) market with more competitive deals and it looks as if this trend will continue throughout 2013.

It seems then that this scheme is having a modest effect and prospects for borrowers are now better than ever.

Some economists have stated that mortgage approvals, which have risen to 55,000 in November 2012, are as a direct result of the funding for lending scheme. Although these levels are only back to where they were a year ago.

The Council of Mortgage Lenders (CML)has forecast a near 10 per cent rise in lending for 2013, from £143 billion to £156 billion. Bob Fennell, chief economist at the Council of Mortgage Lenders (CML), cited the funding for lending as a ‘key reason’ for the more positive outlook.

It seems that if this particular forecast proves to be correct, lending would be at its highest levels since 2008.

The British Bankers Association (BBA) also stated that mortgage approvals rose again in December 2012 by 9 per cent above the same month in 2011.

Interest rates on new mortgages have been steadily decreasing and therefore borrowers looking to obtain a mortgage in 2013 could well benefit from the greater competition in the market.

This flurry of mortgage cuts spells good news for home owners looking to nab lower monthly payments.

David Hollingworth, of mortgage broker London and Country, says “hopefully, rates will come down more and more as lenders benefit from the funding for lending scheme”.

Despite the good news that that the funding for lending scheme seems to have brought IHS Global Insight’s Howard Archer, believes that “housing market activity is still relatively low and economic conditions remain difficult”.

Therefore some experts remain sceptical of a long term boost for the housing market.

Henry Pryor, a property commentator, also warns against too much optimism and he also added that “you can not throw £5 billion to £10 billion at the mortgage market and not see some sort of result. But it is still going to be incredibly difficult for the vast majority to access the deals”.

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