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Mixed results for Government’s Funding for Lending scheme


The Government’s flagship Funding for Lending scheme (FLS) is having a positive impact on UK homeowners, although small businesses are yet to benefit from the initiative, according to a new report.


Launched on 1 August, the FLS is designed to boost lending to homebuyers and small businesses by providing banks with cheap, state-backed funding.


A new Bank of England’s agents’ report said the FLS ‘appeared to be working more quickly in the residential mortgage market than in corporate lending’, with mortgage lending rates beginning ‘to ease’.


However, ‘some business lenders appeared still to be tightening terms,’ the agents report said, despite the FLS being launched more than three months ago.


The tougher conditions were ‘a particular problem for some SMEs, where the availability of overdrafts was said to be continuing to reduce, with banks preferring asset-backed lending and seeking additional personal guarantees,’ the report added.


The FLS enables banks and building societies to borrow the equivalent of up to 5% of their current lending total, with the option to increase this if they meet certain conditions over the next year.


So far 30 banks have signed up to the FLS. The Bank said new fixed term mortgage rates fell ‘by an average of around 20 basis points in October’, or 0.2%.