But why the slow start?
Funding from the scheme has been available since 1 August and whilst there has been a slight improvement in pricing and approvals we have yet to see it as the cure-all for the mortgage market.
Lenders are clamouring to be involved, if they want to compete in the market they need to be playing the same game so are keen to get the low-cost funding that the others are getting. At the time of writing, 30 lenders, including the five largest lenders in the UK, have signed up with many others queuing up behind them.
However, it is not as simple as that. The Bank of England are funding the scheme and need to ensure that they are lending to safe and worthy organisations – after all it has to be repaid in a few years time so they need to make sure they will get the money back. No different to any other lender needing to check out their borrower.
So, any lender wanting to be involved has to go through the due-diligence process.
This involves a lengthy form, an assessment of the collateral being offered (in other words all the loans that are being put forward as surety must be checked to ensure they provide adequate security) and a visit from the Bank of England to interview the senior team and those at the coalface.
This is not a simple or quick process. The lenders, and the Bank of England, have been working hard to get the scheme up and running within their businesses since it was announced in the summer.
But even when the green light has been given the work doesn’t stop there. The FLS funds have to be lent out otherwise they could become more expensive, so the lenders have to decide how that will be done.
That involves decisions around strategy, product, lending policy, pricing etc. Most lenders year ends are 31 December so it would be reasonable to assume that the FLS will have more of an impact on next year’s business targets.
So yes, FLS has had a slow start if you were expecting an immediate big bang, but it is definitely moving in the right direction with more lenders signed up and ready to go. Watch this space…
Roger Knight is lending manager at Newbury Building Society
