Benefits to “Funding for Lending”

Gary Brash
Gary Brash

GARY Brash, right, of Mortgage Advice Bureau says there are many benefits for potential borrowers of the Bank of England’s new “Funding for Lending” Scheme.

THE Monetary Policy Committee (MPC) not surprisingly voted for no change to the Bank of England Base Rate during their September meeting. The decision to stick comes two months after the injection of £50bn into the UK economy in July.

Last month the rumour mill was rife with the suggestion that the MPC may cut the Base Rate beyond 0.5%, but it seems the rumours were wide of the mark. The decision will no doubt be good news for some, as there is a possibility that such action would have caused problems for lending in the mutual sector.

A potential Base Rate cut could have sent savings levels crashing, resulting in a lack of funding for homebuyer lending.

The Bank of England’s newest initiative to stimulate lending in the wider economy - the “Funding for Lending Scheme” officially launched on August 1.

During the last month or so we have seen a high degree of competition re-emerge in the mortgage market following its introduction, although the most competitive rates remain largely in the low loan-to-value sector.

Although the Olympic and Paralympics events have quite understandably dominated our attentions and the media over the last month or so, the increasing competition has kept mortgage borrowers out in significant numbers.

We have continued to see a further shift in borrower appetite towards the fixed rate arena with over 80 per cent of borrowers - both house purchase and those refinancing existing arrangements - opting for those deals during August. More good news for potential borrowers was the number of available products in August. Deals available to intermediaries continued to increase, climbing for the third month running - now standing at more than 5,800.

As well as stimulating an increase in product numbers, the Funding for Lending Scheme has also resulted in a fall in interest rates as lenders compete for business.

This is evidenced by Moneyfacts data showing that at the beginning of September average rates fell once again.

 The average cost of two, three and five year fixed rates have reduced month on month. The average two year fixed rate fell to 4.57 per cent in September, the three year fixed rate to 4.89 per cent and five year fixed rate to 4.60 per cent.

To contact Gary Brash at Mortgage Advice Bureau to speak about your own circumstances and how you could benefit from what is happening in the market, call on 01744 22999 or email garyb@mab.org.uk