As it was announced that the funding for lending scheme would be extended to January 2015, chancellor George Osborne confirmed that the focus would be moved to small and medium sized businesses who could be offered up to 10 times the access to cheaper loans.
The Council of Mortgage Lenders welcomed the time extension and the indirect extension to include lending by non-bank mortgage lenders, in the changes announced by the Bank of England.
Paul Smee, CML director general, said: “It is helpful to have early confirmation that the FLS will be extended for a further year. This will minimise the risk of disruption to lending flows that might arise in anticipation of the closure of the scheme.
“We welcome the indirect extension of the scheme to non-bank mortgage lending too. Although non-bank lenders cannot access the scheme directly, any banks that lend to them will now be able to include that lending as eligible for inclusion in the FLS. This ought to result indirectly in the benefits of the FLS scheme being passed through to non-bank mortgage lenders.”
Brian Murphy, head of lending at Mortgage Advice Bureau (MAB), said: “Business owners have every reason to celebrate the announcement, but I doubt many aspiring homeowners will be so enthusiastic. The FLS has helped to create some movement in the mortgage market over the last nine months, but its work is far from done.
“When the Chancellor first launched the scheme, he set out the aim of ‘making mortgages and loans cheaper and more easily available’ to families aspiring to own their own home. The consistent rate reductions on mortgage products have certainly helped. But so far it has been a select group of borrowers – typically existing homeowners or those with sizeable deposits – who have taken the lion’s share of incentivised funding.
“In fact, the average loan to value (LTV) for purchase mortgages in the first quarter of 2013 was lower than the same time last year. The Government is playing a risky game with the FLS by favouring business owners over mortgage borrowers, and we can only hope it does not dissuade lenders from pursuing greater volumes.”
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