Funding For Lending to be re-focused away from mortgage lending

Rollinghome

opinions4u wrote: »

If the same amount is being channelled in to the scheme, I can't see it affecting savings rates at all.

The banks will lend to businesses instead of home buyers.

Currently the extent to which banks are able to access FFL money is based on the quantity of loans for mortgages and to businesses. From next year it will be based only on loans to businesses.

So presumably much will depend on how much banks want to lend to businesses in order to maximise their access to cheap BoE money rather than from savers and what happens to the demand for mortgages when no longer bank-rolled by the scheme.

Glen_Clark

Rollinghome wrote: »

Currently the extent to which banks are able to access FFL money is based on the quantity of loans for mortgages and to businesses. From next year it will be based only on loans to businesses.

So presumably much will depend on how much banks want to lend to businesses in order to maximise their access to cheap BoE money rather than from savers and what happens to the demand for mortgages when no longer bank-rolled by the scheme.

Banks obviously to prefer to lend on property mortgages. Perhaps they see it as safer (because the Government is determined to keep house prices up), or perhaps its just easier for them to understand than a manufacturing industry. The Bank Manager can just get a valuation from a surveyor and pass the buck if its wrong. Industry is more complicated than that. So I wouldn't count on them increasing lending to businesses.

standinman2009

It's just been stated on the bbc 6 pm news ,that it's very likely building societies will have to increase savings rates to cover future lending so woo hoo let's open the champers !!

innovate

standinman2009 wrote: »

.... so woo hoo let's open the champers !!

to celebrate that your kids will be able to pay more for their mortgage? Always two sides to each coin.

Anyway, keep your powder dry. The Beeb knows no more than anyone else what will happen with interest rates.

standinman2009

My kids re cash buyers lol

coastline

TV reports have hinted at higher interest rates tonight for borrowers and savers....did anyone expect rates to stay at all time lows for a decade..??
The BoE has forecast GDP growth of 2.8% in 2014....against an average of 2.5% for the UK...another reason for a change in direction.
Although it won't be good news for home buyers the average outstanding mortgage in the UK is around £100,000...at 4% this would be £530 a month...at 6% around £640 a month over 25 years.
Its hard to see rates climb 2% in a short period of time yet the people in the rental sector have seen their monthly bills rise by similar amounts....BTL mortgages now stand at 1.5m against 90,000 just 10 years ago.
Well savers might get a bit more...and thats all they've been asking for really...just to get somewhere near inflation with their rainy day money.

http://www.thisismoney.co.uk/money/news/article-2387744/Base-rate-vs-inflation-chart-How-tell-things-really-got-better.html

grizzly1911

innovate wrote: »

to celebrate that your kids will be able to pay more for their mortgage? Always two sides to each coin.

Anyway, keep your powder dry. The Beeb knows no more than anyone else what will happen with interest rates.

Will they be paying more or just something closer to the long term average?

I agree with your point on media speculation.

ChopperST

Rates won't move dramatically until the election. Funding for lending was always meant to be for small and medium businesses anyway wasn't it so I see this as a bit of a non story TBH

A_Flock_Of_Sheep

About time the saver got helped. I am fed up with helping the sodding borrowers.

Perhaps share prices of smaller companies might rise???

bowlhead99

A_Flock_Of_Sheep wrote: »

Perhaps share prices of smaller companies might rise???

No question that improving availability of cheap credit to businesses generally will help corporate stability and profitability which supports growth.

However, from the second paragraph of the original press release:

The FLS extension will therefore provide continued substantial support for lending to businesses in 2014, with incentives in the scheme skewed heavily towards lending to small and medium-sized enterprises (SMEs).

The Governor said this was to "underpin the supply of credit to small businesses over the next year" and the Chancellor said "it is right that we focus the scheme’s firepower on small businesses. Small firms are the lifeblood of our economy".

It is important to recognise the distinction between "small business" and "small-cap listed companies".

The former - which are the people the policy is trying to help - with turnover of maybe £50k to £10m; they are the ones who would find it difficult to get bank finance without the banks being further incentivised to lend. There are getting on for five million businesses with <50 employees and they are risky propositions for banks. Even the 'M' in 'Small & Medium sized Enterprises' with 50-250 employees, have relatively low turnover in the grand scheme of things and most of those companies (there are about 30k of them) do not have listed shares you can buy into.

By contrast, "small-cap listed companies" are the ones in the band below FTSE350 and have market capitalisations of £100-£500m. Those smallcaps do already experience better credit conditions than the unlisted 'small and medium sized enterprises' targeted by the govt for help and as such may not get an appreciable boost from one more year of funding for lending.

There is some crossover between SMEs and the listed world but you would be looking at VCTs and micro-cap funds to access it, rather than small-cap funds.