Nearly half (43%) of mortgage brokers felt that the FLS is having a positive impact – yet almost as many (41%) took the opposite view. Despite the Bank of England figures for November 2012 revealing £1bn extra mortgage lending by the major UK lenders in the first four months of the scheme compared to the same period in 2011, the results suggest brokers are divided over the extent to which the incentive is working to stimulate the market – highlighting the fact that, while there are more mortgages and prices have improved, supply is still tight.
When questioned about the anticipated impacts of the FLS, the most common expectation among brokers was a reduction in mortgage rates (77%). Just over half (51%) thought it will result in an increase in the availability of loans (51%), while slightly fewer (49%) predict more lending at higher loan to value (LTV) ratios. Industry figures suggest the FLS has begun to deliver on all three fronts, but the outcome will vary when measured by what individual brokers can source.
In a separate survey, IMLA members – representing more than 80% of lending in the intermediary sector – were unanimous in predicting an increase in high LTV lending at 85-89% and 90-94% during 2013. However, over half (57%) felt there would be no extra lending at 95-99% LTV, and less than one in five (14%) expected any increase in 100% LTV loans.
Peter Williams, Executive Director of IMLA, comments
“It is interesting to see the divergence of views among brokers on the impact of the FLS given the rather more healthy level of activity in the market. I am confident this is partly due to the scheme still being relatively new, and that more intermediaries will see its benefit as the year progresses. We will certainly be better placed to judge its merits as more of the potential £80bn pot makes its way from lenders to consumers. At the same time, IMLA accepts that brokers’ experiences will vary and FLS is only part of what is needed. IMLA will continue to work to see more mortgage funding becoming available.
“It is also important to remember that the scheme was designed to boost overall lending to households and businesses; and not explicitly to improve access to funding for those who were previously shut out. As expected, we have so far seen the FLS drive down pricing, with the most benefit enjoyed by people who already had access to funding, albeit at higher rates.
“In this respect, the scheme could certainly be targeted more effectively, and our expectation is that we will see more product innovation and higher LTV transactions emerging this year. There is an opportunity for lenders to explore this area of the market, but given the emphasis on affordability in the Mortgage Market Review (MMR), it is no bad thing that it has not triggered a rush to offer high LTV mortgages.”