The UK’s biggest banks continue to be cautious in the mortgage market with overall lending only increasing by 0.6% over the last year.
According to figures released by the British Bankers’ Association, gross mortgage lending stood at £6.9bn in August, which is lower than in recent months.
Approvals for house purchase loans were down by 13% in August and the number of people remortgaging has also dropped significantly, with 33% fewer loans approved last month compared to August 2011.
Funding for Lending Scheme
But with five of the UK’s biggest banks having signed up to the Bank of England’s (BoE) Funding for Lending Scheme (FLS) we may begin to see an increase in lending over the coming months.
The FLS aims to increase the amount banks and building societies are lending to consumers by giving lenders access to cheaper forms of funding. So far, a total of 13 lenders have signed up to the scheme, representing 73% of the market.
Banks to boost credit supply
The institutions can borrow the equivalent of up to 5% of their loan books at favourable rates from the BoE immediately, and more if they meet certain conditions over the next year.
Paul Fisher, the Bank of England’s executive director for markets, has also said that a number of other banks are on the verge of signing up to FLS. He said: “I am confident that the Funding for Lending Scheme will help the supply of credit.”
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