Christian Faes is managing director of Montello Briging Finance
Following the initial introduction of the Funding for Lending Scheme, there seemed to be a general feeling that it was going to have a positive impact on the lending market. If for nothing else, it seemed to have a positive effect on market sentiment. However, the recent Council or Mortgage Lenders figures suggest that more needs to be done if the lending market is to make a real recovery. A lot more.
The CML reports that gross mortgage lending in January was £10.4 billion. For those wondering whether that is good news, the answer is no. That represented a decrease of £1 billion from the amount lent in December of last year; and some £300 million down on the figure for January last year. So the poor result last month wasn’t just a seasonal lull. It was also the worst month for lending since last April.
The broader business lending figures have also been very poor. The Bank of England’s figures showed that in the three month period leading up to November last year, businesses receive £4 billion less than the quarter before (and before the FLS was announced).
So in summary, lending volumes have not actually increased, either in terms of gross mortgage lending, nor in terms of funding provided to businesses. Initially the government was saying that it would take some time for the FLS to show results. However we are now over half a year into the £60+ billion Scheme, and it seems clear that it is not having a dramatic impact – if any real impact at all – so far.
While it is clear that lending volumes have not increased, funding for those that can get it, has actually got cheaper. It was recently reported that mortgage interest rates are at the ‘lowest level they have ever been’. One of the primary goals of the FLS is to pump cheaper funding into the market. The problem is, that so far, its not pumping more money into the market – and not to businesses and investors that are going to be critical to a broader market recovery.