Jump to content
House Price Crash Forum
Bruce Banner

Funding For Lending To Be Scaled Back

Recommended Posts

http://www.bbc.co.uk/news/business-25137444

The Bank of England's move to refocus the Funding for Lending scheme (FLS) on business not mortgage borrowers sparked falls in housebuilders' shares.

The Bank of England's governor Mark Carney, said supporting mortgage lending was "no longer necessary".

An overheated housing market would be a risk to the economy, he said, adding that prices are rising in many regions.

Shares in leading housebuilders including Barratt Developments and Taylor Wimpey fell by around 5%.

Share this post


Link to post
Share on other sites

Best news ive had in months.

Mortgage rates and savings rates will now rise....all those banks that dropped their saving rates to practically nothing can f.k. If they think they are getting my custom.

I'll believe it when I see it

Share this post


Link to post
Share on other sites

Best news ive had in months.

Mortgage rates and savings rates will now rise....all those banks that dropped their saving rates to practically nothing can f.k.

I'm happy about this news. Very happy. It could be good.

Share this post


Link to post
Share on other sites

Osbourne gritting his teeth?

But as Duncan Weldon points out, restricting the FLS to business lending does suggest that the Bank of England has concerns about rising house prices and increasing household indebtedness. And if the result is that interest rates rise on new mortgages and other forms of consumer credit, then it amounts to monetary tightening. No wonder the Chancellor's reply to the Governor appears to have been written with gritted teeth. He had no choice but to be seen to support the Governor's decision, but tightening general credit conditions now could choke off the housing boom that seems to be an important part of his election strategy.

http://coppolacomment.blogspot.co.uk/2013/11/fls-and-bank-of-englands-independence.html

Share this post


Link to post
Share on other sites

I have no idea whether this will work or not but what I can say is that it's all very Canadian. It's pretty common for the government here, in conjunction with the BoC, to tweak lending and mortgage rules in response to changes in the market. The British idea that the only control is interest rates never seems to have taken hold. Evidence for effectiveness is patchy. Vancouver has a crazy housing bubble but Toronto, whilst not cheap, has never reached UK levels of insanity.

Share this post


Link to post
Share on other sites

3 2 1 and we're back in the room. Must admit when I heard this on the news and realized HPC was down, my first thought was censorship :ph34r:

I thought the same too and also I thought it was censored because of the bitcoin thread as it hit $1000 yesterday

Share this post


Link to post
Share on other sites

Well I owe an apology to Carney- this is something I never expected him to do. Nice to be wrong.

Ha, its only because lending has gathered momentum. The minute it stops or even just slows down government will re-enter the frame. They most certainly not allow price discovery to occur until riots have broken out due to the cost of living effects of their loose money policies

Share this post


Link to post
Share on other sites

Ha, its only because lending has gathered momentum. The minute it stops or even just slows down government will re-enter the frame. They most certainly not allow price discovery to occur until riots have broken out due to the cost of living effects of their loose money policies

I can only surmise that this sort of interference is seen as being far more responsive than interest rates were. Like inflation its always "2 years down the lime"

****** it, line, lime same thing.

Share this post


Link to post
Share on other sites

Best news ive had in months.

Mortgage rates and savings rates will now rise....all those banks that dropped their saving rates to practically nothing can f.k. If they think they are getting my custom.

+1

will be nice to see the savers punish each bank in turn by shifting capital around, might force a savings rate war as they scrabble for savers money.

Cash is king ;-)

Share this post


Link to post
Share on other sites

Could this be the trigger for supply?

I'm not convinced FLS has actually pumped that much into the mortgage-market at all, given lack of buyer side demand at these prices, but probably done enough to sustain and push up prices at the margin.

What's more interesting is suddenly home-owners discover the BoE is not back-stopping lending as it was before. EAs might have to learn how to talk sense and talk tough. Then perhaps enough sellers at the margin heading for the exit, to sell at lower prices, causing other owners wanting to get their homes back on the market. Owners pulling their homes off the market was biggest reason for transactions falling through in 2010/11. Now FLS tapered from mortgage sector.

Even better if savings rates really do go up as banks look to normal market channels for capital, and/or borrowing costs-mortgage rates rise.

Share this post


Link to post
Share on other sites

I don't understand how this will boost lending to businesses though?

Savings rates must rise in response surely? My fixed rate ends in Feb, so this is very welcome news indeed.

A turning point??

Share this post


Link to post
Share on other sites

Tweaks a temporary subsidy to banks' capital as HTB2 comes onstream.

He wouldn't do it if it had a significant impact on lending.

IIRC not all banks were using FLS anyway.

Mostly 'jawboning' like his forward rate guidance.

Share this post


Link to post
Share on other sites

Tweaks a temporary subsidy to banks' capital as HTB2 comes onstream.

When HTB was launched it was implicitly stated that it would run alongside FLS. This is a major turnaround.

Share this post


Link to post
Share on other sites

I don't understand how this will boost lending to businesses though?

Savings rates must rise in response surely? My fixed rate ends in Feb, so this is very welcome news indeed.

A turning point??

Just a thought BTL= business ??

Share this post


Link to post
Share on other sites

Could this be the trigger for supply?

I'm not convinced FLS has actually pumped that much into the mortgage-market at all, given lack of buyer side demand at these prices, but probably done enough to sustain and push up prices at the margin.

What's more interesting is suddenly home-owners discover the BoE is not back-stopping lending as it was before. EAs might have to learn how to talk sense and talk tough. Then perhaps enough sellers at the margin heading for the exit, to sell at lower prices, causing other owners wanting to get their homes back on the market. Owners pulling their homes off the market was biggest reason for transactions falling through in 2010/11. Now FLS tapered from mortgage sector.

Even better if savings rates really do go up as banks look to normal market channels for capital, and/or borrowing costs-mortgage rates rise.

I am.

FLS has allowed banks to lend money vey very cheaply whilst at the same time allowing banks to NOT compete for savings, crashing deposit rates.

By comparision, HTB is s.d all.

Removal of FLS will put about 2% on the mortgage rate.

For those interested in subtle signals there's a good post on FTAV:

http://ftalphaville.ft.com/2013/11/28/1708552/uk-consumer-is-fine-small-business-health-next/

'That last one, controlling debt to income and debt to loan values is interesting. How about a Kiwi style limit on the proportion of new lending above 80 per cent loan to value?'

Imagine thta - temporary funding to allow 95% mortgages then being only offering 80%?

Share this post


Link to post
Share on other sites

It is my understanding that FLS has been very influential for bank mortgage lending, so surely mortgage rates and saving rates will rise fairly quickly once the scheme is ended.

Edited by GARCH

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

  • Recently Browsing   0 members

    No registered users viewing this page.

  • The Prime Minister stated that there were three Brexit options available to the UK:   203 members have voted

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal

    Please sign in or register to vote in this poll. View topic


×

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.