Last post: Oct 27, 2012
The Government’s oft-maligned Funding for Lending scheme is proving its detractors wrong as more and more institutions sign up to take part. From just 17 institutions involved at the end of September there are now 30 with more on the way.
The Government's oft-maligned Funding for Lending scheme is proving its detractors wrong as more and more institutions sign up to take part. From just 17 institutions involved at the end of September there are now 30 with more on the way. Under the scheme the Bank of England is lending will lend UK Treasury bills to lenders for any period up to four years for a 0.25% fee per year, increasing by 0.25% for each 1 per cent fall in net lending to a maximum of 1.5 per cent. Lenders place collateral with the BoE as security and can then use the Treasury bills to access money at "rates close to the Bank of England base rate". Each lender can access up to 5 per cent of their existing loan book to SMEs and households and are incentivised to boost lending because every extra pound of additional lending would benefit from being in the scheme. In short they are being given very cheap funds to pass on to UK businesses and consumers. There is no doubt the scheme is having an impact as evidence by record low mortgage rates (Tesco's 1.99% 2 year fixed rate is the lowest headline rate ever seen on a UK mortgage and 5 year fixed rates are available under 3%) and tremendous commercial rates being offered by banks such as Metro bank who are now offering rates as low as 4% over Base rates. The full list of institutions currently in the scheme are:
- Aldermore
- Arbuthnot Latham
- Barclays
- Cambridge Building Society
- Clydesdale
- Co-operative
- Coventry Building Society
- Cumberland Building Society
- Hinckley & Rugby BS
- Ipswich BS
- Julian Hodge Bank
- Kleinwort Benson
- Leeds BS
- Lloyds Banking Group
- Manchester Building Society
- Mansfield Building Society
- Monmouthshire BS
- Market Harborough Building Society
- Metro Bank
- Nationwide BS
- Newbury Building Society
- Newcastle Building Society
- Nottingham Building Society
- Principality BS
- RBS Group
- Santander
- Skipton Building Society
- Tesco Bank
- Virgin Money
- West Bromwich Building Society
But these things take time and while the scheme has certainly had an impact in pricing since its launch in August, the volumes of business it is hoped to generated aren't anticipated to kick in until next year. It has had its critics but the evidence suggests this scheme will provide cheap funding to the UK ecnomy as it was set out to do. Do discuss your business finance options whether a commercial unsecured loan, a commercial mortgage or Asset finance please either complete the relevant enquiry form in that section of our website or call us on 0845 1260350
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