Funding for Lending Scheme: one year on

1 August 2013

Today marks the first anniversary of the Funding for Lending Scheme (FLS), the government initiative to pump cheap money into the banking system to encourage the banks to lend more money to individuals and businesses.

The scheme has been broadly praised for helping to bring about record low mortgage rates, while keeping savers trapped in the mire of low interest rates.

"Funding for Lending has given the mortgage market some real get-up-and-go," said Richard Sexton, director of e.surv chartered surveyors.

"Compared to last year, house purchase lending is 23% higher. It's true that the funding source has allowed banks to slash interest rates, and savers have been punished.

"But there has been a real pay-off. Loans to high LTV borrowers are now at a four-and-a-half year high. More first-time buyers than ever are able to access house purchase loans. Rates have dropped and banks are more willing to lend to first-time buyers in the knowledge they have a cushion of cheap credit to fall back on should some of those loans go pear-shaped."

However, likening the effects of the FLS to "a course of steroids for the mortgage market" he pointed out that it has also helped to push house prices "skyward", which is "great for existing homeowners but a blow for first-time buyers struggling to build up a deposit".

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Meanwhile, one in four mortgage brokers believe the FLS has failed to live up to expectations, according to the Intermediary Mortgage Lenders Association.

Barely half (53%) agreed that product choice had grown over the past 12 months and only 40% said the mortgage market is more accessible as a result of the scheme.

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