UK’s flagship Funding for Lending scheme boosts property market

Mortgage borrowers in the UK are benefitting from the Funding for Lending scheme which is providing a strong foundation for growth in the property market.

The latest figures from the Bank of England shows that net lending by banks and building societies participating in the Funding for Lending Scheme increased by £1.6 billion in the second quarter of 2013.

The biggest net lenders between March and June this year were Nationwide, Lloyds, Barclays and Virgin Money, the Bank of England said.

The reaction for the home lending industry is positive. Paul Hunt, managing director of Phoebus Software said 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.
 
‘In particular banks have used the Funding for Lending scheme to allow more competitive mortgage rates and by providing higher loan to value mortgages which has resulted in a significant jump in first time buyers loans recently,’ he explained.

‘The revival in first time buyer numbers demonstrates not only the underlying buyer demand, but that lenders have pushed the market forward to unlock this demand. Further relief for banks and building societies has been found in the scheme, as it has provided lenders with the means to drive growth in mortgage lending,’ he added.

According to Brian Murphy, head of lending at the Mortgage Advice Bureau (MAB), said it has also helped mortgage costs come down.  ‘The success of the Funding for Lending Scheme’s has been clearly demonstrated by banks and building societies boosting lending and reducing costs, with benefits of cheaper funding rife in the mortgage market,’ he pointed out.

He explained that since the start of the scheme average fixed rate mortgages have fallen by at least one percentage point across two, three and five year deals, while total product numbers have soared to over 10,000 for the first time in five years.

‘Yet as mortgages rise in number and fall in price, it’s been borrowers with sizeable deposits who have reaped the greatest rewards. In the past 12 months the typical purchase loan to value (LTV) has actually fallen slightly for homebuyers, stifling improvements in market access for those with smaller savings pots,’ he added.

‘As FLS enters the third quarter of 2013, we hope to see lenders extend the benefits of falling funding costs to higher risk sectors, combating the risk of rising house prices locking out a larger proportion of potential buyers,’ he also said.