BoE cuts FLS for mortgages

29th November 2013

The Bank of England has announced that the Funding for Lending Scheme (FLS) will no longer cover new housing loans extended by banks from next year and instead the scheme will focus solely on boosting loans to businesses.

Lenders will also have to hold additional capital for each new home loan made, making it less profitable for lenders to issue new mortgages. “Risks to financial stability may grow if there are further substantial and rapid increases in house prices and a further build-up of household indebtedness” said the Governor, Mark Carney, at a press conference. He added: “It is no longer appropriate to have our foot on the accelerator”. The Telegraph reports that experts have warned that mortgage rates may rise early next year following the announcement. Paul Smee, director general of the Council of Mortgage Lenders, said "Although the changes to the FLS may be a surprise, they are not a shock. Mortgage lenders are well equipped to meet their funding needs, as wholesale funding market conditions have improved and retail deposits are robust."

Source:   The Daily Telegraph