Bank of England pulls support for cheap mortgage lending

by Aaron Strutt

Nov 29 2013

The Bank of England (BoE) has moved to reduce the risk of a house price bubble in certain parts of the UK by announcing plans to refocus the Funding for Lending Scheme (FLS) away from mortgages. Instead of continuing support for cheap mortgages, the scheme will be focused on finance for small and medium sized businesses.

The Funding for Lending Scheme (FLS) has been the real driver enabling the banks and building societies to offer incredibly low mortgage rates since its introduction in July 2012. This surprise announcement by the BoE is likely to push up mortgage rates from early next year. It is also likely to tempt many homeowners to remortgage off of their lenders standard variable rates and onto a cheaper deal.

Mark Carney, governor of the Bank of England, said: “Since the FLS was launched it has contributed to a substantial fall in bank funding costs. This has fed though to a significant improvement in household credit conditions and given this success there is no longer a need for FLS to provide broad support to household lending.”

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November 29, 2013