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MS Leader: Bank’s FLS bombshell

The Bank of England’s announcement last week that it was ending the Funding for Lending Scheme for residential mortgages in 2014 has certainly taken the entire market by surprise.

At its heart seems to be a genuine concern on the Bank’s part that the housing market is overheating.

In an interview with The Guardian on Friday last week, the Bank of England governor Mark Carney was asked what advice he would give to aspiring home buyers.

“Think about the mortgage you are taking on, the debts you are taking on,” he said. “Are you going to be able to service that mortgage five years from now, 10 years from now, if interest rates are higher?”

And that explains the concern in the Bank’s Financial Stability report that it published last week which highlighted as a concern the housing market and in particular the increase in high LTV lending.

The number of lenders offering 95 per cent LTV mortgages it says has risen from 28 to 36 in the past year, and the number of lenders advertising these products has risen by more than 50 per cent over that period.

Which obviously puts the Bank at direct odds with the Government as its Help to Buy schemes have been prime driver behind this rise.

The Bank is also eyeing LTV caps as a way of stemming anything it does not like the look of in the future.

So rate rises are now inevitable as a result of the changes but the good news seems to be that demand for mortgages has now hit such a level many pundits are keeping their predictions for 2014 essentially unchanged.

While crystal ball gazing is always fraught with difficulties, hopefully the Government and Bank really can balance the recovery to provide the market with sustainable growth. 



Lucky No.13

Few in the mortgage industry would have guessed that 2013 would end on such a positive note and even the most superstitious adviser can find reasons to be cheerful and express hope for a prosperous 2014


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Virgin rethinks property value and income for interest-only

  Virgin Money is from 9 December restricting its interest-only products to customers with a minimum income of £100,000 in total for applicants, including bonuses, and a minimum property value of £500,000. The minimum property value replaces the minimum loan size that it previously had of £300,000 for interest-only loans. The lender says it still […]


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