Bank reveals firms signed up to Funding for Lending scheme

Thirteen financial institutions accounting for around 73 per cent of UK lending have signed up to the Funding for Lending Scheme, according to the Bank of England today.

The Bank’s Monetary Policy Committee Member Paul Fisher today released information on the current participants of the scheme which allows banks and building societies to exchange existing loans for Treasury bills, on which they will pay an interest rate of 0.25 per cent over the next 18 months.

Aldemore, Barclays, Hinckley & Rugby BS, Ipswich BS, Kleinwort Benson, Leeds BS, Lloyds Banking Group, Monmouthshire BS, Nationwide BS, Principality BS, RBS Group, Santander and Virgin Money have all been confirmed as participants in the scheme.

The BoE has released details of all participants’ base stock of loans as of June 30 to serve as a benchmark for measuring the scheme’s success.

Fisher says: “The Bank cannot give details of an individual firm’s previous or new lending plans. It is for each of them to explain how the FLS enables them to support the economy. Most have already announced reductions in some interest rates or a loosening of other terms and conditions. Some will respond by lending to firms that they would previously not, because they can now earn a return that compensates for the extra risk. All these approaches will help.”

“We cannot expect every bank in the FLS to increase its stock of lending to the real economy over the 18-month [drawdown] period … the crucial impact will be whether the FLS enables them to lend more than they would have done in its absence”.

Fisher adds that the hope is for new entrants to step in and pick up where the major banks cannot.

Average mortgage rates have started to come down in the weeks since the launch of the Funding for Lending scheme. Figures compiled by for Mortgage Strategy show that average rates on five-year fixed mortgages at 60 per cent LTV have fallen the furthest, down from 4.35 per cent in June to 3.79 per cent yesterday.

There has been minor decline in nearly all higher LTV fixed rates except for at 100 per cent which remains unchanged at 5.98 per cent and at 80 per cent LTV. At 95 per cent LTV, average rates are 0.09 per cent lower than at the beginning of June and currently stand at 5.61 per cent.

As in August, average fixed rates at 80 per cent LTV are currently higher than for the start of June and stand at 4.71 per cent compared with 4.59 per cent for June 1. This is believed to be due to more lenders having introduced new variable products at 60 per cent to the market.

Cuts to fixed rates on 75 per cent LTV mortgages have gained the most ground in recent weeks. Rates had dropped by 0.16 per cent between June 1 and August 10, to 4.45 per cent but had fallen a further 0.22 per cent to 4.23 per cent by September 24.