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First-time buyer mortgages remain in short supply

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by Jan Harris
First-time buyer mortgages remain in short supply

The Funding for Lending scheme (FLS) is failing to boost the supply of mortgages for first-time buyers, according to financial information service Moneyfacts.

FLS, which was launched by the Treasury and the Bank of England in August, is designed to reduce funding costs for lenders, allowing them to increase their lending to businesses and individuals, at lower rates.

However, figures from Moneyfacts show there has been little improvement in the availability of low-deposit mortgages.

More than two-thirds of the mortgage products currently available on the market require a deposit of at least 20 per cent, Moneyfacts found.

However, the scheme has led to a fall in the interest rates on some new mortgage products, which will help people looking to remortgage.

It also helped to boost the number of approvals for home loans to more than 50,000 in September, while consumer lending is growing at it strongest rate for four years.

FLS is gaining momentum, with 30 banks now signed up, suggesting that it could be unlock around £66 billion of lending.

Major lenders signed up to the scheme include Barclays, Lloyds Banking Group, Royal Bank of Scotland, the Co-operative Bank and Santander, as well as many building societies.

This week Tesco Bank became the latest lender to sign up to the FLS.

Benny Higgins, the CEO of Tesco Bank CEO said: “We welcome the Funding for Lending scheme, and are delighted to be able to pass on the benefit to our customers.

“We are committed to responsible lending and hope to enable our customers to borrow a further £1bn over the next year at affordable rates.”

Around 80 per cent of the UK lending market is now represented on the scheme, with the notable exception of HSBC.

Analysts suggest that the increase in the number of lenders signed up to FLS could cause the Bank of England to delay another round of quantitative easing.

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News posted: November 2, 2012

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