Overall mortgage lending has fallen by £1.5bn since June 2012 despite banks and building societies drawing close to £14bn from the Bank of England’s Funding for Lending scheme, new data show.
Lenders drew £13.8bn from the Funding for Lending scheme in 2012, with Barclays and Nationwide leading the charge.
Of the 39 lenders involved in the scheme, Barclays was top in terms of mortgage lending in the last three months of 2012 with overall advances totalling £1.9bn, with Nationwide Building Society close behind with £1.8bn.
However, cumulative net lending has fallen by £1.5bn since 30 June 2012 as major banking groups have retrenched further.
In the last three months of 2012, Lloyds’ cumulative net lending fell by £3.1bn, Santander’s fell by £2.8bn and the Royal Bank of Scotland’s by £1.7bn.
The Bank of England said the data still showed a positive effect from the scheme, saying that it has succeeded in encouraging more lending to the UK economy than would have been the case in the absence of the scheme.
At an aggregate level, prior to the launch of the FLS in July 2012 the Bank judged that UK bank lending was more likely to decline than increase over the subsequent 18 months.
The FLS incentivises banks to boost their lending by reducing bank funding costs. This allows banks to reduce the price of new loans and increase their net lending.
Chris Love, director at independent mortgage broker, Mortgage Simplicity, said data has been skewed by some larger banks who have “slammed on the lending brakes” to bolster their capital bases.
Mr Love claimed that the scheme had clearly helped first-time buyers as availability of loans at higher loan-to-value ratios had improved.
He said: “Look beyond this and there’s no doubt the Funding for Lending Scheme has improved confidence in the market. There are now many more mortgage products than there were a year ago and those products are often a lot cheaper.
“Crucially, the Funding for Lending Scheme is helping more first-time buyers get a foot on the property ladder, although lenders’ stringent criteria are still excluding borrowers who have a less than perfect credit or income profile.
“With a large number of lenders having tapped into the Funding for Lending Scheme, there has been a noticeable increase in the availability of higher loan-to-value mortgages.
“This, coupled with stable house prices, has meant many first time buyers are finally finding it easier to purchase their first home.”
