BoE: Net lending of FLS funds on the rise
In total 18 lenders used the FLS in Q2 to draw down some £2.0bn in funds. This took the total amount withdrawn from the scheme to £17.6bn.
The biggest net lenders during the quarter were Lloyds Banking Group, Barclays, Virgin Money and Nationwide.
A spokeswoman from Barclays said: “Barclays has responsibly increased lending by £7.49bn since the FLS began supporting businesses and households with access to finance to grow their business, buy a new home or improve their quality of life. Barclays welcomes anybody who needs finance to come and talk to us.”
Paul Hunt, managing director of Phoebus Software, said: “The Funding for Lending scheme has underpinned the housing market over the past year and has provided strong foundations for growth.
“Gross mortgage lending has improved across the spectrum and figures confirm the housing market is stable.
“Mortgage lenders’ progressive attitude has helped boost the market as their willingness to lend through the provision of innovative products is helping first time buyers.
The FLS was designed to create an incentive for banks and building societies to boost lending and Richard Sexton, director of e.surv chartered surveyors, said the scheme was having the desired effect.
He said: “Banks have used the scheme to lower mortgage rates, ease criteria, and introduce a wider choice of loans, which has prised open the first-time buyer market and sent house prices skywards.
“Gross mortgage lending has recovered to its pre-financial crisis levels, and looks set to remain strong. House purchase lending is 30% higher than last year, and the number of loans could hit 70,000 per month by the end of the year.”
But whilst mortgage lending has increase lending to SME’s, one of the main target groups for FLS funds, has failed to materialise with net lending to small and medium-sized enterprises (SMEs) remaining negative in Q2.
Sexton added: “The scheme has done wonders for the housing market, but the main point of it was to provide credit to SMEs, who are starved of funding and can’t grow.
“If we think of lenders as investors, then they clearly still see SMEs as a less attractive ‘asset class’ than the consumer and housing markets, from a risk perspective.”