“After weeks of speculation we welcome the confirmation that the Bank of England is extending the Funding for Lending Scheme (FLS) until January 2015. But while supporting lending to small and medium-sized enterprises (SMEs) is vital to the economy, we are concerned that targeting the revised scheme towards UK businesses will severely limit the gains for the mortgage market.
“By incentivising SME lending so heavily for the rest of 2013, there is a real danger this will overshadow the need to boost the supply of funding to the housing market. Although the equity loan element of Help To Buy is already ‘live’, the mortgage guarantee scheme does not begin until January and it can take months for initiatives like these to become fully operational. The last thing the market needs is an artificial ‘stop-start’ momentum.
“The FLS has certainly improved the availability of mortgage credit, but there is significant untapped demand for higher loan-to-value (LTV) lending. We have consistently called for the inclusion of specialist lenders in the scheme alongside banks and building societies, to take advantage of their innovative approach. Extending the FLS is an important development, and we await further detail and discussions with the Bank to ensure a benefit for the mortgage market.”