Bank lending scheme to boost housing market
House builders have welcomed a government scheme aimed at boosting the economy by rewarding banks which lend to households and businesses with lower interest rates and increased ability to borrow.
The Funding for Lending Scheme, launched today by the Treasury and the Bank of England, will allow banks and building societies to borrow from the bank for a period of up to four years.
Banks and building societies that increase their lending will be able to borrow more through the scheme and for a lower cost than current funding rates. The Bank of England will make public the amount it lends to each bank and building society through the scheme, and how much they in turn lend to households and businesses.
The move was welcomed by the Home Builders Federation, which believes an increase in affordable lending could improve mortgage availability and boost demand for new homes.
Stewart Baseley, executive chairman of the HBF, said: ‘A lack of lending for individuals and businesses has been the main constraint on house building in recent years, making Britain’s housing supply crisis even more acute.
‘However the success of the scheme is in the hands of the mortgage lenders. If they take advantage of the FLS and reflect its lower funding costs in lower mortgage rates, then we should see an increase in new home buyers.’
George Osborne, chancellor of the exchequer, said: ‘The Treasury and the Bank of England are taking coordinated action to inject new confidence into our financial system and support the flow of credit to where it is needed in the real economy – showing that we are not powerless to act in the face of the Eurozone debt storm.’