Regulation preventing higher LTVs in FLS

Regulation preventing higher LTVs in FLS

Broker opinion is divided over the effectiveness of the Government's Funding for Lending Scheme (FLS) as new figures reveal that.

Broker opinion is divided over the effectiveness of the Government’s Funding for Lending Scheme (FLS) as new figures reveal that while 43 per cent noted a positive impact, 41 per cent took the opposite view.

The survey - produced by the Intermediary Mortgage Lenders Association (IMLA) - suggests that scepticism remains around the Government incentive as despite an influx of more mortgages at lower prices, supply is still not meeting demand.

December 2012 figures released by the Bank of England show that in the first five months of FLS, lending for house purchases by major UK lenders increased by £1.7 billion, though when compared to the same period in 2011, their overall mortgage lending fell by £2.3 billion.

The purpose of the survey was to gauge broker attitudes towards the extent to which FLS is working to stimulate the market, with most (77 per cent) expecting a reduction in mortgage rates to result.

Other notable broker expectations about the Government incentive included: 51 per cent predicting it will result in an increase in the availability of loans, and 49 per cent estimating more lending at higher LTVs.

Industry figures suggest the FLS has begun to deliver on all three fronts, but the outcome will vary when measured by what individual brokers can source.

Commenting on the findings, Peter Williams, Executive Director of IMLA, said: “It is interesting to see the divergence of views among brokers on the impact of the FLS given the rather more healthy level of activity in the market. I am confident this is partly due to the Scheme still being relatively new, and that more intermediaries will see its benefit as the year progresses. We will certainly be better placed to judge its merits as more of the potential £80 billion pot makes its way from lenders to consumers. At the same time, IMLA accepts that brokers’ experiences will vary and FLS is only part of what is needed. IMLA will continue to work to see more mortgage funding becoming available.

“It is also important to remember that the Scheme was designed to boost overall lending to households and businesses; and not explicitly to improve access to funding for those who were previously shut out. As expected, we have so far seen the FLS drive down pricing, with the most benefit enjoyed by people who already had access to funding, albeit at higher rates.

“In this respect, the Scheme could certainly be targeted more effectively, and our expectation is that we will see more product innovation and higher LTV transactions emerging this year. There is an opportunity for lenders to explore this area of the market, but given the emphasis on affordability in the Mortgage Market Review (MMR), it is no bad thing that it has not triggered a rush to offer high LTV mortgages.”

Leave a comment