CML response to Funding for Lending scheme

By Bridging Loan Directory -

 

The Council of Mortgage Lenders welcomes the publication of further information today about how the “funding for lending” scheme from the Bank of England will work.

The scheme is designed to enable access to cheaper funding than might otherwise be available to banks and building societies to support lending growth. It does not target specific parts of the market such as mortgages, instead being aimed widely at all types of lending to non-financial businesses and individuals. If lenders increase their lending, funding under the scheme is significantly cheaper than if they reduce their lending. So the scheme is designed to provide an incentive for lenders to increase their lending.

Individual lenders will need to assess carefully how well the funding available under the scheme suits their individual funding requirements and lending aspirations. In aggregate, the scheme is likely to act as a positive influence on both the flow and the cost of new lending for customers to support growth in the economy. But it is not possible to give a direct estimate of its potential impact on the mortgage market specifically.

CML director general Paul Smee comments:

“While it is difficult to say exactly what its impact on the mortgage market may prove to be, the “funding for lending” scheme seems likely to encourage lending in its widest sense and to that extent should be a helpful support to economic growth. We will continue to look at the detail to identify any specific impacts for mortgage lenders.”

Reacting to the Funding for Lending Scheme (FLS) announcements by the Chancellor and the Governor of the Bank of England today, Phillip Monks, CEO of Aldermore, one of the UK’s leading challenger banks, said:

“We have seen a range of measures to try and stimulate the economy and boost lending to businesses over recent years, but most of these have only had limited success. The major problem has been a lack of focus on the volume of lending to businesses, and to small firms in particular.

“The Funding for Lending Scheme is a positive development for British business. Crucially, it appears to be anchored around net new lending figures by incentivising banks to lend more if they want access to a lower cost of funds. The FLS should be a key plank in ensuring a greater flow of lending to small businesses and homeowners right across the country.

“Given that there are now a number of challenger banks in the UK that are ready, willing and actually able to increase lending to businesses, we hope that Government ensures the FLS also works for this group. Not only will this help encourage more lending to British businesses, but it has the positive effect of more banking competition – something that is desperately needed.”‪