There are tentative signs that the Funding For Lending scheme (FLS) is easing credit conditions, according to the Centre for Economics and Business Research (CEBR).
The latest Bank of England data, released yesterday, showed that the number of loans approved for home purchases increased slightly in December. Lenders approved 55,785 new mortgages over the month, with a total value of £8.0 billion. Both mark a year-on-year improvement, with the number of mortgages approved 6.1% higher than a year earlier, and their value up 10.4%.
The increase in mortgage approvals suggests that the FLS is having an effect, Katie Evans, economist at the CEBR said.
She said: “The scheme gives banks access to more credit for longer and at lower rates when they lend more. By making mortgage credit more readily available this has allowed banks to offer higher loan-to-value ratios, reducing the deposits demanded of first-time buyers. The increase was largely anticipated, as lenders reported the latest Credit Conditions Survey that the supply of credit had increased significantly in the three months to mid-December in response to the incentives created by the FLS. Spreads in mortgage rates also fell over Q4 2012, and should continue to do so.
“This increase in mortgage availability comes as house prices begin to recover from a fall at the start of last year. Yesterday’s Land Registry house price data showed that over 2012 house prices rose by a modest 0.3%, with prices picking up in Q4 after a subdued summer. Rocketing London property prices continued to drive the national increase, with prices in the capital rising by 4.7% over the year.
“The FLS should continue to have a positive effect on mortgage availability over the next year. As deposit requirements fall and spreads on mortgage rates tighten further over the next three months, we expect lending to first time buyers to increase. Mortgage approvals are still less than half their monthly number at the market’s peak in 2007 however. Though the FLS is easing conditions, the market remains sluggish.”
As a coal face broker, I cannot see FLS has had an and suspect it is more to do with consumer confidence.
In my opinion,home movers who feel confident about acquiring their first or a bigger home and 0.5% rate variance does not create buyers.
Thereon, FTBs looking high LTVs are mostly restricted by lending criteria and deposit . In fact, FTB levels have been rising year on year before FLS.
The remortgage market remains stable and hampered by a few low SVRs, but debt consolidation is up.
FLS has afforded some "cheap money" to the market, which is good for borrowers of course, but one might ask if this has no or little impact on the housing market, would the Government be better off directing iy elsewhere to create jobs and more sustainable growth?