View more on these topics

‘Term funding scheme contributing to drop in SVRs’: Bank of England

Bank-of-England-Panorama-BoE-700x450.jpg

The Bank of England term funding scheme is working and leading to lower SVRs, according to BoE deputy governor Minouche Shafik.

In a speech today, Shafik said the TFS is letting lenders pass on the 0.25 per cent base rate cut.

Shafik said: “The initial signs are good – standard variable rates have already been, or, we expect, shortly will be reduced on the vast majority of existing mortgages and the rates available on new lifetime tracker mortgages are on average 25bps lower.

“Though it is of course difficult to say how much of this is attributable to the TFS.”

The term funding scheme was announced in August when the Bank cut base rate from 0.50 to 0.25 per cent.

The scheme is funded by central bank reserves. Chancellor Philip Hammond says this could reach £100bn, but that this depends on demand.

At the time, the Bank said: “The cut in Bank rate will lower borrowing costs for households and businesses.  However, as interest rates are close to zero, it is likely to be difficult for some banks and building societies to reduce deposit rates much further, which in turn might limit their ability to cut their lending rates.

“In order to mitigate this, the MPC is launching a Term Funding Scheme that will provide funding for banks at interest rates close to Bank rate.

“This monetary policy action should help reinforce the transmission of the reduction in Bank rate to the real economy to ensure that households and firms benefit from the MPC’s actions.”

Recommended

Mark-Carney-with-bank-note-in-background-700.jpg

Bank of England keeps rates on hold

The Bank of England has left interest rates at 0.25 per cent at its September meeting, following its cut to rates in August. However, the central bank has reiterated that it expects to cut rates further before the end of the year. Its QE package also remains the same after it expanded it to £60bn in […]

Dividend slump? Not if you look globally

By George Boyd-Bowman, Manager of the Neptune Global Income Fund Recent research has indicated that global dividend growth will slump by as much as 50 per cent in 2016. As collapsing commodities hit high-profile dividend payers, George Boyd-Bowman explains why the US and Japan are his top picks for income growth in 2016. Click here […]