Fears that FLS revamp will hit mortgage lending

Mortgage approvals by high street banks for house purchase nudged up in March to stand at 31,227.

The news came as the Government announced extending its Funding for Lending Scheme, but diverting it towards small businesses – a move which one critic described as risky for the mortgage market.

While up on the 30,579 in February, the approvals figure was below the 32,196 monthly average for the six months to March.

Remortgaging also inched up slightly from 16,543 approvals in February to 18,637.

The data is from the British Bankers Association, which said that high street banks provide 60% of new mortgage borrowing.

Separately, the Government has announced a year-long extension to the Funding for Lending Scheme, which will be directed towards small businesses rather than household mortgage lending – something that was not universally welcomed.

Brian Murphy, head of lending at Mortgage Advice Bureau, said: “Business owners have every reason to celebrate, but I doubt many aspiring home owners will be so enthusiastic. The FLS has helped to create some movement in the mortgage market over the last nine months, but its work is far from done.
 
“When the Chancellor first launched the scheme, he set out the aim of ‘making mortgages and loans cheaper and more easily available’ to families aspiring to own their own home. The consistent rate reductions on mortgage products have certainly helped.

“But so far it has been a select group of borrowers – typically existing home owners or those with sizeable deposits – who have taken the lion’s share of incentivised funding.
 
“In fact, the average loan to value (LTV) for purchase mortgages in the first quarter of 2013 was actually lower than the same time last year. 

“The Government is playing a risky game with the FLS by favouring business owners over mortgage borrowers, and we can only hope it does not dissuade lenders from pursuing greater volumes.”