You are here: Home - News -

BoE stimulus package predicted to bolster mortgage lending

  • 15/06/2012
  • 0
The Chancellor’s “funding for lending” scheme, which could support up to £80bn of new loans for the mortgage market and businesses, could bolster gross lending up to £140bn this year, beyond current expectations, said a broker.

Ray Boulger, senior technical manager at John Charcol, said the scheme, which the Chancellor announced in his annual Mansion House address at the City of London last night, could push up gross mortgage lending up beyond the slight drop predicted on last year’s figures.

According to the CML, gross mortgage lending over the whole of 2011 was an estimated £139.9bn.

Boulger said: “I think that although the impact of the scheme won’t affect the market until Q4, as there is still some time before the money becomes available and there is also a few months timelag from application to completion stage,  I think one can expect to see Q4 at least with lending increased on last year as a result of this.

“We saw quite a significant upturn in Q1 lending this year, compared to Q1 last year but that is now beginning to tail off, and the expectation was that there would be a reduction in lending in Q3 and Q4.”

“Gross lending for the year, I suspect now, could end up quite close to last year’s £140bn.”

The Chancellor unveiled two stimulus plans yesterday; the “funding for lending” scheme, which will cut banks’ funding costs in exchange for lending commitments. Osborne said the new scheme could support up to £80bn of new loans.

Banks will also have access to short-term liquidity support to deal with “exceptional market stresses,” in tranches of at least £5bn a month.

Boulger said he disagreed with comments made in the press today that suggested lenders may not want to take up the money because they don’t want to lend.

He said: “I think that’s rubbish. If they have money, there will be some borrowers that they will be prepared to lend to. Bearing in mind that residential mortgage lending is the least risky type of lending that the banks do, to the extent that they do take up these funds, it seems to me logical that a decent chunk of that could be allocated to the mortgage market.”

The funding for lending scheme will provide funding to banks for an extended period of several years. The rates will be below current market rates, but the Bank of England (BoE) has yet to announce how much this will be by.

“The likely term of the loans is probably going to be 3 to 4 years. That will also help lenders, in so far that the FSA is pressing them to increase the average life of their funding.

“The market was really impacted from February, when Santander pulled in its horns. That’s when we started to see mortgage rates go up.

“However, if you bring more funding into the market, that would suggest to me that there is every reason to see rates for new business come back down a quarter or half per cent. But until we see what the BoE is going to do, it’s difficult to be precise.”

There are 0 Comment(s)

You may also be interested in

Business Skills

In this section, we offer short ‘how to’ guides on harder to crack areas of business. From social media, to regulation or niche product areas, we cover it all.


Our journalists interview key industry entrepreneurs, strategists and commentators for day-to-day market insight and a strategic view of where the industry is heading. We offer lessons for success and explore the opportunities for your business

Success in Practice

Here, we share case studies fleshing out best practice to help you decide what could work for your business. Take a look at how others approached complex tasks like launching a new mortgage lender, advising on a new product area or deciding to specialise in another. Learn from others mistakes and triumphs.


Each week, we ask top mortgage and property commentators with a unique perspective to examine a key news headline, market move or regulatory or political issue.


Vote in our weekly poll here. It’s your chance to tell us what you think and be heard on the top news stories of the week. Review our archive to find out what your industry really thinks and all our coverage of the results.

Top Comments

Be part of the conversation on Mortgage Solutions. We want to hear from you. We have a tool called Disqus to tell us which stories get the most comments each week. Every Friday, the team picks the most thoughtful or opinionated contributions from our readers to enjoy again. Don’t forget to share your favourite stories from the site on social media to keep the conversation going.
Read previous post:
Property market stabilizing – LSL

House prices saw annual growth for the first time since April 2011 with a 0.50% uplift in April, according to...