Brian Murphy, head of lending at Mortgage Advice Bureau, comments:
“The success of the Funding for Lending Scheme’s has been clearly demonstrated by banks and building societies boosting lending and reducing costs, with benefits of cheaper funding rife in the mortgage market. Since the start of the scheme average fixed-rate mortgages have fallen by at least one percentage point across two, three and five year deals, while total product numbers have soared to over 10,000 for the first time in five years.
“Yet as mortgages rise in number and fall in price, it’s been borrowers with sizeable deposits who have reaped the greatest rewards. In the past twelve months the typical purchase loan to value has actually fallen slightly for homebuyers, stifling improvements in market access for those with smaller savings pots.
“As FLS enters the third quarter of 2013, we hope to see lenders extend the benefits of falling funding costs to higher risk sectors, combatting the risk of rising house prices locking out a larger proportion of potential buyers.”
David Brown, commercial director of LSL Property Services comments:
“Last August the entire economy was on shaky ground. While the foundations of today’s recovery could be more solid still, there are encouraging signs for the housing market, and some clear benefits of Funding for Lending for a wave of aspiring homeowners. Resultant cheaper mortgage rates for first-time buyers, alongside the first stage of Help to Buy, have made home-ownership possible for thousands. Their dreams might otherwise have been dashed. Thankfully, they aren’t the victims of an extended credit crunch.”
“But there’s other good news too – more affordable finance for landlords is having a real effect in the private rented sector. More supply of rental properties has been made possible by better access to buy-to-let mortgage finance. That’s already having an impact on more affordable rent rises, amid an unprecedented surge in demand. Admittedly, lower savings rates are one obstacle for potential first-time buyers, making raising a deposit even harder. In this respect Funding for Lending has been less helpful. However – the main result is a healthier housing market. And that renewed optimism is already an important incentive for the supply of more, better-quality homes. We’re seeing a stronger purchase market, rented market – and the entire UK economy is on a better footing. That’s good news for everybody, from landlords, to tenants, to first-time buyers.”
Duncan Kreeger, director of short-term lender West One Loans, said:
"Small companies are the lifeblood of the British economy – and Funding for Lending has shown them little support. But luckily, the real economy is another story. Most SMEs have already dismissed this scheme as largely irrelevant – instead, they are powering forwards on their own momentum, supported by new forms of finance.
“Small businesses need flexibility, and entrepreneurs need speed. One year in to this exceptional subsidy and mainstream banks are still struggling to lend at the required pace. But compared to new models, like peer-to-peer, they never could. Alternative finance has already outpaced the government’s business bank, and it looks like Funding for Lending will fall by the wayside in a similar way. Even using £18 billion in its first year, Funding for Lending has failed to keep dusty old models of banking on life support. It’s looking increasingly unlikely that mainstream banks will be able to catch up and compete with the speed and agility of alternative finance.
“SMEs have a bright future, and so does the UK economy. But some old methods of finance belong in the 20th century.”
Paul Hunt, managing director of Phoebus Software said:
“The Funding for Lending scheme has underpinned the housing market over the past year and has provided strong foundations for growth. Gross mortgage lending has improved across the spectrum and figures confirm the housing market is stable. Mortgage lenders’ progressive attitude has helped boost the market as their willingness to lend through the provision of innovative products is helping first time buyers. In particular banks have used the Funding for Lending scheme to allow more competitive mortgage rates and by providing higher loan to value mortgages which has resulted in a significant jump in first time buyers loans recently.
"The revival in first time buyer numbers demonstrates not only the underlying buyer demand, but that lenders have pushed the market forward to unlock this demand. Further relief for banks and building societies has been found in the scheme, as it has provided lenders with the means to drive growth in mortgage lending.”
Goncalo de Vasconcelos, founder of equity crowdfunding platform, SyndicateRoom, added:
"The Funding for Lending Scheme may have made a difference for homeowners but it's had zero impact whatsoever on Britain's SMEs. Net lending remains negative, and yet at the same time we're told things are picking up.
"We speak to too many companies who have been knocked back by their bank to believe that credit conditions have materially improved, and are likely to continue to improve in the near term. Any SME director will tell you that arranging a bank loan or overdraft today is as hard as it was two or three years ago. Banks are talking the talk but very few, for the smaller business at least, are walking the walk.
"Balance sheet repairs, State aid conditions where applicable and a new era of conservatism are inhibiting the success of the Funding for Lending Scheme for Britain's smaller businesses. They're seen as too much of a risk. While bigger companies may be able to access the capital markets, this just isn't an option for smaller businesses. SME credit conditions, we're told, should improve in the months ahead. We've heard that before and will believe it when we see it."
