FLS is failing to inspire

I suppose the biggest news of the week so far, for those of us in the property market anyway, has been the Bank of England data detailing the progress of the high profile Funding for Lending Scheme.

Published on Monday, the data was certainly a mixed bag. On the one hand, you had stronger lending figures from both Barclays and the Nationwide during the fourth quarter; on the other hand, lending at Santander, Lloyds and RBS contracted during the same period — and quite significantly, too.

Most brokers are saying that the mainstream mortgage market is now in a much better state than it was a year ago but what\'s also clear is that some banks are still having to rebuild their capital bases. This is clearly impacting the amounts they can lend and limiting the success of the scheme.

The long and the short of it is that certain key high street banks are still repairing the damage wreaked by the financial crisis and are under sustained pressure to meet the new legislation on capital adequacy.

The result of these major lenders retrenching is that net lending in the fourth quarter was down just under £2.5 billion on the third quarter. In total, some £13.8 billion has been borrowed by banks via the Funding for Lending Scheme, which is way less than had been hoped for when the scheme was launched.

One or two economic observers have said that the fact that the Bank of England\'s Monetary Policy Committee is considering not just printing more money but also negative interest rates suggests there are doubts at the very top of policy whether the Funding for Lending Scheme will work.

This certainly appears to be the case with business lending. While it may be having an effect on the mortgage market, the Funding for Lending Scheme has had very little impact at all on lending to SMEs, which remain starved of any kind of bank finance unless they have sizeable assets.

All in all, this latest set of data on the Funding for Lending Scheme fails to inspire.