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Government loans to offer lenders a lifeline

Mortgage lending is set to receive a boost under government proposals to offer cheap loans to banks through its funding for lending scheme.

Delivering their annual Mansion House speeches to the City last week, chancellor George Osborne and Bank of England governor Sir Mervyn King revealed an ambitious scheme to boost mortgage and business lending.

Set to launch in the next few weeks, the Bank will provide unlimited loans to lenders at lower than market rates with conditions to ensure the money is lent to businesses and home buyers at cheaper rates.

Ray Boulger, senior technical manager at John Charcol, says the stimulus could make a major difference to gross lending this year. He says: “It will provide loans with money that would not have been available. It addresses the funding problem, which is the key issue with the mortgage market.

“It could be a game changer. Until yesterday I would have predicted gross lending would be lower than last year but now we can expect it to be similar.”

But while the Council for Mortgage Lenders welcomes the move, it says the impact on mortgage lending is unclear.

A spokesman says: “Lenders need to understand more details of the proposals before speculating about effects on the mortgage market.”


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