In a surprise announcement, the Bank of England and HM Treasury have announced changes to the Funding for Lending scheme from next year. Instead of boosting households with cheaper mortgages, the incentives in the scheme will be refocused towards supporting business lending.
Commenting on the changes, Bien Media client Mark Harris, chief executive of mortgage broker SPF Private Clients, says: ‘Funding for Lending has been a huge success in terms of boosting mortgage lending generally by pushing down rates to record lows. It has proved a real fillip to the housing market, enabling many more buyers to be able to afford a mortgage. A number of lenders have taken advantage of it but now they will have to refocus their efforts in the small business space rather than offering more mortgages to households. This is likely to have a disproportionate impact on smaller lenders who may have been more reliant on these cheap funds than the bigger players.
‘Small and medium-sized businesses could do with a boost, particularly in a week where RBS’s appalling behaviour has been unearthed. It is unlikely that they are the only bank who have been engaged in such practices.
‘The Government obviously feels that Help to Buy 2 will support the housing market, and along with the first phase of the scheme, help those homebuyers who need it most.
‘This move will certainly calm the fears of those who are worried about an impending house-price bubble although we feel those concerns are not justified. Transaction levels and prices are still a fraction of what they were at the height of the housing market, and while London performs strongly, the rest of the country is lagging someway behind.
‘This move may also accelerate the return of the securitisation market as lenders look to recycle their capital.’