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35 UK lenders sign up to FLS – BoE

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  • 03/12/2012
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35 UK lenders sign up to FLS – BoE
Bank of England figures show 35 lenders have signed up to the UK's Funding for Lending Scheme (FLS), which accounts for 80% of total lending in the economy, according to Bank of England figures.

The first scheme data out today showed a total of £4.4bn has been drawn down so far from the BoE, with just £0.5bn in net lending by the end of September.

Each FLS participant is able to borrow an amount up to 5% of its stock of loans to the UK non-financial sector as at 30 June 2012 and increase its borrowings in line with lending from that date to the end of 2013.

The Bank cautioned it is still too early to use these figures to gauge the FLS’ impact on the volume of UK lending as the time lag on the scheme is considerable.

However, Paul Fisher, executive director for markets at the Bank of England, said lending rates have already started to fall.

“Since the scheme was announced we have seen widespread falls in funding costs across different sources and an equally wide variety of lending rate reductions. But it is too early to use these data as a reliable indication of the impact of the FLS on lending volumes,” he said.

Of those 35 lenders, 22 are mutual, according to the Building Societies Association.

Adrian Coles, director-general of the BSA said it is still too early to look at the figures and see what the scheme could achieve.

“The design of the scheme means that the funds can be drawn at any time until the end of 2013, so it is not imperative to draw right at the start. Mutuals aim to lend sustainably over the longer term. Nevertheless, we are pleased that two BSA members had already made initial drawings by the end of September. Even so, it may take some time for these funds to feed through into any new lending,” he said.

Andy Knee, chief executive of LMS, is more confident, said he expected homeowners to continue to reap the rewards of this in 2013.

Knee projected the remortgage market could grow by up to 25% next year, albeit from a very low base.

“The Government scheme can already be credited with generating some excellent deals for homeowners with healthy levels of equity, with a two-year fixed rate of 1.99% now available from one lender on mortgages of up to 60% LTV. However, there remains little appetite for new competitive mortgages above 60%.”

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