“The recent trends in mortgage applications and approvals clearly show a more confident mortgage market and the positive influence the Funding for Lending Scheme (FLS). The scheme has not only significantly improved pricing and availability but has also been fundamental in reigniting lender and consumer confidence, with mortgage rates at unprecedented lows.
“The market has so far adjusted extremely well to significantly higher activity levels, and the steadily decreasing numbers of mortgages in arrears and repossessions is evidence of an ongoing dedication to responsible lending.
“The Bank’s announcement today refocussing the FLS away from the housing market and towards small businesses is understandable. In some respects it marks a further step towards normality, taking the mortgage market out of special measures. Clearly the Bank has been mindful of growing concerns about the renewed upturn in the housing market and it racing ahead unchecked into 2014. The very evident improved credit conditions will be supplemented by the next stage of Help to Buy and it is no real surprise that the Bank has now chosen to modify the measures in place.
“Returning to a fully self-sustaining market in the medium term makes good sense and the Bank’s sudden move may throw some plans for 2014. IMLA has long argued that we want phased and planned withdrawal rather than sudden policy change. We must hope today’s somewhat unexpected announcement of the removal of further FLS support does not trip up the mortgage market recovery. We draw some comfort from the fact that existing FLS funding is repaid over the next four years, which will help cushion the impact of the change.
“Finally this shows the Bank in action. It has often been criticised for being slow and behind the market. Subject to being clear as to who controls the process, it does suggest that the Bank might be equally decisive about amending the Help to Buy scheme in the light of market conditions.”