Hold Fire on Dismissing FLS
Martin Reynolds is managing director of SimplyBiz Mortgages
There have been some interesting articles and headlines since the Bank of England produced its update on the Funding for Lending Scheme (FLS). A number have said that the scheme is not working and that the figures act as proof. The headline figures are:
– Q4 2012 net lending – (-£2,425m)
– Cumulative since 30/6/2012 – (- £1,502m)
On the face of it the figures do back up their argument, but I think that we need to dig deeper and look at individual lenders. From a positive perspective the following lenders – who are active in the intermediary market – are showing a positive Q4 2012 figure of £5,009m
– Barclays/ Woolwich
– Virgin Money
In addition a number of regional building societies have been active and are showing positive growth – so it’s not all bad news.
So where are the issues, and are there rationales behind them?
Santander (-£2,385m) – This would be expected as 2012 saw Santander pull back from their previous high levels of business production in 2009-2011. This would naturally create outflow as borrowers come off two year products etc. What will be interesting is to see the same figures when published for H1 2013 as Santander are presently being very aggressive on new business with the return of the 7 day sale.
Lloyds (-£3,118m) – Whilst they did not pull back as aggressively as Santander last year, they did reduce their market share. In addition, with the size of their back book there is always the opportunity for net market share to occur. With the number of current and historic brands and back books to manage we may well see negative numbers for a while, but I will be surprised if they will be of the size of Q4 2012
As the above two lenders are of such a scale then any negative movement will have a disproportional effect on the total numbers.
Back to the main question, has FLS been a failure? In short I believe not because basically it’s too early to tell. Will all lenders hit the positive net lending figures required? Potentially no, but it will be the few rather than the majority. I do believe though that FLS should have been targeted in where it could be used (LTV or customer profile targeted) rather than how it seems to have been used in the sub 60% LTV arena but we cannot change this now. It would though be interesting if some of the lenders provided data on increased business levels within LTV bandings as this may actually show the opposite.
FLS is here and we should embrace all the positives from it rather than trying to knock it down. All new money in the market is welcome.