One year on: Is Funding for Lending working?


It is one year since the government launched the Funding for Lending scheme and the question on everyone’s lips is: is it working? Well, we think it is. Undoubtedly, mortgage rates have fallen and are at their cheapest ever levels. There is also increased mortgage availability and crucially, more choice and better rates for first-time buyers.

My fellow director Adrian Anderson is extensively quoted in today’s Guardian discussing the scheme:

Adrian Anderson is a director of the London-based mortgage broker Anderson Harris. He says FLS started to make an impact last autumn and momentum has been growing. “In the last year interest rates, especially fixed rates, have gone down significantly. Twelve months ago you would have paid an average of 4.7% for a five-year fixed-rate mortgages, and now you would pay about 3.7%. Rates on two-year fixed-rates have fallen by a similar amount.

“At the beginning from what we could see most of the FLS money was quite concentrated on mortgages at lower loan-to-values, but the people who are benefiting now are first-time buyers and others who are borrowing at a high LTV. The main change has been price. I think the banks have relaxed their [lending] criteria a little bit, but borrowers are still having to prove their incomes.

“FLS has definitely been a good thing for the mortgage market, for the banks who are lending, for mortgage brokers and for borrowers. I have seen a lot of clients who were on lenders’ standard variable rates decide to remortgage now because rates are so good. Most are choosing five-year fixed-rate loans because they are worried about years three, four and five when rates might have started to rise again.”

Jonathan Harris
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Jonathan Harris