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Mortgage Interest Neutral

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I've been moving around some of my cash to improve the interest I'm receiving and have found that I'm now roughly getting the same amount of interest on my cash that I'm paying the bankers for my mortgage. Obviously this will only remain as long as the current interest arbitrage I'm exploiting doesn't get closed.

For the time being I only have to pay down the capital, although thanks to compound growth working in my favour soon I should be making money.

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cut out the middleman....we should take loans from the CB...

In effect, by this method, you are creating your own inflation and seeing the value of your money lower.

An actual demonstration of the real World.

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The effect of FLS ....supposed to be for business lending only now ..my @rse

FLS funding can only be raised against business lending now (specifically excluding BTL from being classified as such), which is at least some improvement on the previous situation, but AIUI once raised this funding can be used for whatever the lenders want to use it for, so IMO your @rse is right to be dubious. ;)

Lloyds actively advertise that they use their FLS funding for their BTL lending, for instance.

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cut out the middleman....we should take loans from the CB....

I could not agree more. Instead of bailing out and socializing banks all the time, there simply should be one state run conservative and low paying bank. Or, there should only be private banks and no CBs and bailouts. What we have is the worst of both worlds.

Edited by Silverfinger

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well I have an offset mortgage so I pay no interest and a small annual fee of 300 dollars. works for me...

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I could not agree more. Instead of bailing out and socializing banks all the time, there simply should be one state run conservative and low paying bank. Or, there should only be private banks and no CBs and bailouts. What we have is the worst of both worlds.

(my bold)

RBS?

What would the banking landscape look like if the £75,000 deposit protection scheme was only available from one state run bank?

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FLS funding can only be raised against business lending now (specifically excluding BTL from being classified as such), which is at least some improvement on the previous situation, but AIUI once raised this funding can be used for whatever the lenders want to use it for, so IMO your @rse is right to be dubious. ;)

Lloyds actively advertise that they use their FLS funding for their BTL lending, for instance.

From my understanding a bank can access the equivalent of the amount they lent for business purposes the previous year ? who and how do the BOE/GOV check if those figures are correct it`s wide open to abuse imo but i`m sure the banks will say their accounting practises are as clear as crystal

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From my understanding a bank can access the equivalent of the amount they lent for business purposes the previous year ? who and how do the BOE/GOV check if those figures are correct it`s wide open to abuse imo but i`m sure the banks will say their accounting practises are as clear as crystal

I may be wrong (and would be happy to be corrected) but AIUI the Bank of England actually hold the loans against which the FLS funding is being raised and so opportunities for abuse would appear limited.

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The effect of FLS ....supposed to be for business lending only now ..my @rse

AH HA....Hence the BTL accent on the marketing. They are businessessess after all.

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Na, they want the security of a property not the security of a business......100% mortgage debt on property, 50% min down on a business if lucky....people and business is high risk.

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I may be wrong (and would be happy to be corrected) but AIUI the Bank of England actually hold the loans against which the FLS funding is being raised and so opportunities for abuse would appear limited.

The Bank will confirm that the Participant has sufficient collateral available and that the drawing will not result in the Participant’s FLS Group exceeding its Borrowing Allowance.

From the link...... how do they determine the borrowing allowance ?

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From the link...... how do they determine the borrowing allowance ?

Presumably based on the value of the eligible loans that they have with the Bank in the FLS Pool and their existing FLS drawings?

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Presumably based on the value of the eligible loans that they have with the Bank in the FLS Pool and their existing FLS drawings?

Thats where my scepticism lay i have not seen anything definitive on how they define the borrowers "limit" ,i vaguely remembered it was based on the amount which was drawn down from the last scheme and lent to businesses which IIRC included BTL so if that is correct (that part i`m not sure about) they will have the same available this time around as last time and last time seen a massive amount of BTL lending...and as you say once it`s drawn down the banks are free to do as they please

If people like IRRO can achieve a neutral mortgage rate via interest on their savings how are the banks making their money traditionally the spread between what a borrower pays in IR`s and saver received in Ir payments was a big part of the banks profits if it no longer the case the banks spread must be coming from elsewhere

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I could not agree more. Instead of bailing out and socializing banks all the time, there simply should be one state run conservative and low paying bank. Or, there should only be private banks and no CBs and bailouts. What we have is the worst of both worlds.

How conservative should that bank be, and paying what? The optimal growth of the money supply is an open question. The private sector is thought generally to be a better allocator of capital than central govt because it represents a diversity of opinion about risk/reward rather than a monoculture. Proper regulation is what's needed, to preserve the banking system's diversity and frustrate the herding and cartelism which led to systemic failure in 2008.

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How conservative should that bank be, and paying what? The optimal growth of the money supply is an open question. The private sector is thought generally to be a better allocator of capital than central govt because it represents a diversity of opinion about risk/reward rather than a monoculture. Proper regulation is what's needed, to preserve the banking system's diversity and frustrate the herding and cartelism which led to systemic failure in 2008.

Bankruptcies of banks should be a frequent occasion such that self-regulation would take hold. No bailouts.

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Thats where my scepticism lay i have not seen anything definitive on how they define the borrowers "limit" ,i vaguely remembered it was based on the amount which was drawn down from the last scheme and lent to businesses which IIRC included BTL so if that is correct (that part i`m not sure about) they will have the same available this time around as last time and last time seen a massive amount of BTL lending...and as you say once it`s drawn down the banks are free to do as they please

If people like IRRO can achieve a neutral mortgage rate via interest on their savings how are the banks making their money traditionally the spread between what a borrower pays in IR`s and saver received in Ir payments was a big part of the banks profits if it no longer the case the banks spread must be coming from elsewhere

AIUI it's based on what has been newly lent and not drawn against, not the amount that was drawn down last time, so FLS funding generated by SME lending can go towards BTL lending but that BTL lending can't then in turn generate new FLS funding. (Presumably the idea is, at least in part, to create a notionally virtuous circle of SME lending.)

In terms of bank profitability my feeling is that it's probably part of quite a complex picture at present. (It was obviously a lot worse when lenders could raise FLS funding off the back of OO and BTL lending as well.)

Edited by Neverwhere

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AIUI it's based on what has been newly lent and not drawn against, not the amount that was drawn down last time, so FLS funding generated by SME lending can go towards BTL lending but that BTL lending can't then in turn generate new FLS funding. (Presumably the idea is, at least in part, to create a notionally virtuous circle of SME lending.)

In terms of bank profitability my feeling is that it's probably part of quite a complex picture at present. (It was obviously a lot worse when lenders could raise FLS funding off the back of OO and BTL lending as well.)

That maybe so but what determines the borrowers "limit " that's the bit i do not understand the BOE wants the banks to lend to SME so why put a limit on it and that limt looks to be different for each bank

This is the part that jumps out at me regarding what i have alluded to in a previous post i have read most of the rules quickly but will be the first to admit it`s a tad above my pay grade

(iii) The Drawdown Period for the second part of the FLS (the Extended Drawdown Period) runs from 3 February 2014 to 31 January 2018. 1 The quantity of funding available during the second part of the FLS depends on lending from 1 April 2013 to 31 December 2015, with the exception of New Groups (see 4.2(iv) below), for which it depends on lending from 1 January 2016 to 31 December 2017

http://www.bankofengland.co.uk/markets/Documents/flsopproceduresfeb16.pdf

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That maybe so but what determines the borrowers "limit " that's the bit i do not understand the BOE wants the banks to lend to SME so why put a limit on it and that limt looks to be different for each bank

This is the part that jumps out at me regarding what i have alluded to in a previous post i have read most of the rules quickly but will be the first to admit it`s a tad above my pay grade

http://www.bankofengland.co.uk/markets/Documents/flsopproceduresfeb16.pdf

I'm not sure that there is a set limit, other than that established by the amount of eligible lending over the periods in question?

My understanding is also limited though so if anyone has a firm grasp on the details and wants to chip in that would be welcome!

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I'm not sure that there is a set limit, other than that established by the amount of eligible lending over the periods in question?

My understanding is also limited though so if anyone has a firm grasp on the details and wants to chip in that would be welcome!

Well i`m in the same boat,but i read the part of the quote in bold below as what determines the limit for each bank .whether i`m right or not i do not know

(iii) The Drawdown Period for the second part of the FLS (the Extended Drawdown Period) runs from 3 February 2014 to 31 January 2018. 1 The quantity of funding available during the second part of the FLS depends on lending from 1 April 2013 to 31 December 2015, with the exception of New Groups (see 4.2(iv) below), for which it depends on lending from 1 January 2016 to 31 December 2017

Edited by long time lurking

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Well i`m in the same boat,but i read the part of the quote in bold below as what determines the limit for each bank .whether i`m right or not i do not know

Yes, that's what I meant above also, the 'lending' in question being eligible lending by the firms seeking FLS funding.

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Yes, that's what I meant above also, the 'lending' in question being eligible lending by the firms seeking FLS funding.

So whata bank lent between April 2013 and December 2015 determines how much they can borrow in the next X years ?

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So whata bank lent between April 2013 and December 2015 determines how much they can borrow in the next X years ?

That's my understanding. Only counting eligible lending though, so only what they lent to SMEs over the relevant period. There may be some kind of upper limit to it but I'm not aware of what it is if there is one?

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That's my understanding. Only counting eligible lending though, so only what they lent to SMEs over the relevant period. There may be some kind of upper limit to it but I'm not aware of what it is if there is one?

The way i read it (and what i can vaguely remember reading when the extension was announced) the upper limit is the total amount the bank in question lent /drew down from the fls between 04/13 12/15 which would include a massive amount to BTL

I could well be wrong though

Edited by long time lurking

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The way i read it (and what i can vaguely remember reading when the extension was announced) the upper limit is the total amount the bank in question lent /drew down from the fls between 04/13 12/15 which would include a massive amount to BTL

I could well be wrong though

BTL is specifically excluded now so I don't think that is the case currently:

Form FLE Guidelines - Funding for Lending Scheme

The amount of lending will be based on the quantity of sterling loans made by a Participant’s FLS Group to UK resident corporate SMEs, unincorporated businesses (UBs) and certain non-bank credit providers. In all cases lending will be in the form of drawn loans.

[. . .]

Section 1 - Total loans to corporate SMEs

This section refers to lending specifically to UK resident corporate SMEs. These are defined here as private non-financial corporations with annual debit account turnover on the (bank or building society) main business account of less than £25 million [. . .] Buy to let lending to unlimited liability partnerships should not be included in this section.

[. . .]

Section 2 - Total loans to unincorporated businesses

This section refers to loans specifically to UK resident unincorporated businesses (UBs) [. . .] Buy to let lending should not be included in this section.

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