SPECIAL FEATURE: Budget 2013 and FLS
The Government’s Funding for Lending Scheme was always intended to be a temporary measure that will run its course early next year.
But the suggestion of its impending extension or modification means we are waiting with baited breath for next week’s announcement to see what is decided.
There was never going to be a quick fix for the mortgage market and both the prospects and resulting impact of the FLS have been disputed since its introduction.
It was always going to be a slow-burner and the latest CML figures for January 2013 include both good and bad news in the form of an annual increase in purchase lending set against a monthly decline.
So what would it mean if the FLS is extended?
Currently non-banks are excluded from the scheme and the majority of lending is taking place in what might be viewed as relatively comfortable, low-risk areas.
A more inclusive scheme would serve to unlock further appetite for innovation and lending while better targeting would help to meet the needs of potential borrowers towards the fringes of the market.
And what if the FLS does tail off in January as planned – or evolve in the Budget to become more business oriented, as has been hinted at both by the Coalition partners and opposition?
Worrying as this would be when the mortgage market is still edging towards recovery it is a reminder that FLS was always intended to be a temporary measure and therefore its impact meant to act as a trigger as opposed to a long-term solution in itself.
In its absence would we be left to bank on improvements in the retail saving and securitisation markets to support greater mortgage lending in 2014 and beyond?
And if this were achieved how would the nation’s house builders manage to keep pace with growing demand?
What is certain is that to achieve sustained growth and recovery in the mortgage market competition and innovation must continue.
Whether this will be encouraged by an extension of the FLS or through some other means may become clearer in the week ahead.
And with the next election at the back of everyone’s minds now is the time for policymakers to start setting out a long-term vision for the sector.