The volume of new loans granted to households and businesses in the UK has not improved significantly and the cost of mortgages is rising despite the launch of the Bank of England’s Funding for Lending Scheme (FLS) in July, reported the Financial Times.
Data from the central bank revealed that lending to private non-financial firms has dropped yet again. In August, loans provided to these companies fell by £1.2 billion (S$2.38 billion) while over the past three months, it declined at an annualised rate of 3.4 percent.
There is also little evidence that the FLS is helping households and businesses. Under the scheme, 13 banks have applied for £60 billion (S$119.22 billion) worth of low-cost loans. Theoretically, the savings from accessing cheap money could be passed on to borrowers, but lenders are not yet doing this.
According to a recent study, lenders stated that they plan to boost their mortgage lending following the implementation of the FLS. However, new mortgage approvals in August only increased moderately from very low levels.
Moreover, interest rates on new mortgages rose in some key categories. The average rate for two-year fixed-rate loans with 25 percent deposit inched up to 3.69 percent from 3.67 percent in July; while the rate for loans with a 10 percent deposit increased to 5.93 percent from 5.83 percent.
“Early indications suggest the FLS is having an impact, but it is unrealistic to expect to see that in lending figures for August,” said a spokesman from the central bank.
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