On the first anniversary of the Bank of England launching the lending incentive scheme, 27% of brokers feel its performance in the mortgage market has fallen short of its billing while just 16% of brokers have had their expectations exceeded.
The scheme arrived in August 2012 with the Bank stating it would “incentivise banks and building societies to boost their lending to UK households and non-financial companies“. Yet while two-thirds of brokers feel that product pricing has improved (67%) 12 months later, barely half agree that product choice has grown (53%).
Fewer than half say the market is more accessible as a result of the FLS (40%) – despite 48% reporting a rise in consumer interest prompted by the scheme.
Mainstream borrowers have visibly benefitted more than near-prime borrowers from improving conditions. Just 35% of brokers were unable to source a mortgage for the former in the second quarter of 2013, 15 percentage points lower than the 52% reported in Q2 2012.
In contrast 46% of brokers failed to source a mortgage for near-prime borrowers in Q2 2013, just nine percentage points better than the equivalent time last year (55%).
Peter Williams, Executive Director of IMLA, comments
“Even allowing for the spread of brokers’ experiences, these results suggest the FLS has not stimulated the market as much as some people had originally hoped. The survey offers a real market level insight into the outcomes being achieved. By setting out with the broad aim of increasing lending, the scheme has had limited effects on widening access to the market and left a significant policy hole which the Government is seeking to tackle by committing greater funding through Help to Buy.
“It is likely that FLS-related lending figures will improve as the year progresses, but we are still well short of previous peaks – so it is little wonder that the first twelve months of the scheme have seen a muted response from brokers. With Help to Buy underway, the new mortgage guarantee scheme due to start in January 2014 and the FLS refocused and extended to January 2015, we could see momentum building into 2014.
“However we now have a series of overlapping measures in place which suggests a lack of long-term vision and planning. All are time limited and increases in housing supply have been slow to materialise. The threats posed by possible house price inflation because of stimulus measures, alongside upwards adjustment of interest rates in the medium term, are considerable.
“Unveiling one high-profile plan after another may be electorally attractive, but doubts must remain as to whether we can avoid the situation where just a third of young households could be owner-occupiers by 2020 – just half the number seen in 1993. It is vital that government, regulators and lenders work to channel our collective efforts towards a balanced housing and mortgage market.”