Housework still not thorough enough

Peter Williams MS blog

The Funding for Lending Scheme continues to be a bone of contention; with the Bank of England’s figures released earlier in the week merely adding further fuel to the flames of discussion.

Net lending by FLS participants stood at £1.6bn, which was slightly stronger than the previous quarter of £1bn, helped in part by the addition of a new participant – bringing the current total to 41.

Nevertheless, when looking at the bigger picture, net lending on the whole has remained reasonably flat since the scheme was introduced.  

Although these figures may suggest that the FLS has not stimulated the market as much as some had originally hoped, perhaps the most valuable aspect of the scheme in practice has not been the direct support it has provided but rather the impact it has had on confidence and liquidity in funding markets more generally.

The extent of which cannot, unfortunately, be expressed in numbers.  

When the extension of the scheme was announced earlier in the year we expressed our concern that the Bank’s revised focus towards SMEs could hinder the possible advancements of the mortgage market.

However, this week’s figures show that net lending to individuals and the number of mortgage approvals for house purchase have in fact both picked up in the second quarter of the year while, interestingly, net lending to SMEs was negative.  

Obviously this is encouraging for the mortgage sector but it shows that government cannot take a one size fits all approach when it comes to promoting economic growth.

The varying experiences of different sectors under the FLS highlight the need for an overarching housing strategy. The current disjointed initiatives are promoting staggered growth, and if the different areas of the market continue to progress at different rates then it is extremely unlikely that we will arrive at a harmonious market any time soon.