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FLS begins firing as net lending rises to £1.6bn in Q2

Lenders participating in the Government’s Funding for Lending scheme registered their first significant positive quarterly net lending figure since the scheme’s launch over a year ago.

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Bank of England data, published today, shows net mortgage and business lending from FLS participants was £1.6bn in the second quarter, following negative net lending in the previous two quarters – a negative £2.4bn in Q4 2012 and a negative £1.8bn in the first quarter of the year.

In the third quarter of 2012, net lending was positive, at £39m, but pales in comparison to the Q2 2013 figure.

However, while net lending was positive in the second quarter, it is down nearly £2.3bn since the scheme’s launch in July 2012.

In the second quarter, Nationwide Building Society saw the biggest rise in net lending, at £2.3bn, with Lloyds in second with net lending of £1.3bn. Virgin was third with net lending of £738m in the second quarter, then Barclays and Coventry, with net lending of £668m and £576m, respectively.

Overall, since the scheme’s launch, Barclays’ net lending figure is the highest, at £7.5bn, followed by Nationwide at £7bn.

At the other end of the scale, Santander has seen net lending fall £10.4bn since the FLS launched last July, while Royal Bank of Scotland and Lloyds have seen net lending fall by £6.8bn and £5.3bn in that time.

While the Bank of England does not split the figures, it said aggregate net lending to individuals has been “positive recently and picked up slightly in 2013 Q2”, although net lending to businesses “remained negative” in the second quarter, despite the BoE offering greater incentives for banks to increase SME lending since April.

At 30 June, the aggregate outstanding FLS drawings from the scheme’s 41 participating lenders stood at £17.6bn.

BoE executive director for markets Paul Fisher says: “The FLS is continuing to support the economy with a range of indicators suggesting that credit conditions are steadily improving for households and firms, and FLS participants collectively expect net lending volumes to pick up over the remainder of this year.”

SPF Private Clients chief executive Mark Harris says: “While net lending is still lower than the amount withdrawn by participants in the scheme, this outlook has changed considerably with the Bank of England forecasting that lending will pick up during the second part of this year.

It takes a while for confidence in the housing market to re-emerge after such a long period of doom and gloom, and for buyers to realise that lenders have regained their appetite to lend. What we have already seen is that the FLS has had a significant impact on mortgage rates, with these falling significantly to historic lows.”

Table showing total drawdowns and net lending breakdowns:

FLSDataTable

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