As new figures show that the Bank of England’s Funding for Lending Scheme (FLS) caused an unexpected surge in mortgage loans, the Treasury Select Committee has hit out at the scheme for a “bias” towards mortgages rather than business lending.
In the committee’s report on the chancellor’s Autumn Statement, published this week, MPs say they are concerned about reports that businesses are not benefiting as they should from the FLS.
December’s mortgage approvals rose to 55,578, compared with November’s 54,011, in what is traditionally a quieter month for the housing market, and on the back of the figures, the Council of Mortgage Lenders is predicting gross lending of £156bn this year, up from £143bn in 2012.
However, the Select Committee’s report calls on the Treasury to review the scheme’s impact and report back to it, saying that it is concerned by reports there may be a bias in the effect of the scheme that favours lending for mortgages rather than lending to SMEs.
The report adds that the Bank of England and the Treasury should assess whether this is the case and report their findings and any proposed action to the Treasury committee.
In addition, businesses are not the only ones to feel let down, as the Bank’s data also showed that the average rate paid by lenders on new savings fell 0.2 percentage points to 2.11 per cent over the month, which is the lowest return since the depths of the recession in March 2009.
The FLS, which allows participants access to cheap funds in return for growing their lending, is expected to see a “significant” boost in credit availability this year.
However, Executive Director of the Bank, Andrew Bailey told MPs last week that lenders had slashed deposit rates much more than mortgages, saying that “the jury is still out on whether we have seen as much adjustment as we ought to see”.