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Both Sides of the Coin

Written By On 04/12/2013

With the BOE's recent announcement that the Funding for Lending Scheme will no longer be used for mortgage loans in January, the landscape for both borrowers and savers alike is changing alongside it.

In essence this will mean that banks that have been borrowing 'cheap money' from the government by using the scheme, will not be able to pass it on to their customers to buy homes any further. Therefore realistically, the financial institutions will need to find money to use for mortgages another way.

This leads us back to the traditional tried and tested channel they have used for decades. That will probably be attracting customers to save with them in order to use their funds in offerring mortgages and loans.

The government has handed out approximately eight billion pounds through the scheme since it was started in August last year to help home owners and small businesses.

Bank of England governor Mark Carney said that the Bank now believe that enough money has been used to boost the housing market and they have achieved what they set out to do. In a few weeks they will use the FLS to concentrate solely on small businesses.

With the added result of unemployment falling faster than was originally expected, this could spell interest rates rising by the end of next year.

But on the other side of the coin, whilst borrowers have been having the advantages of record low bank interest rates, savers have been frustrated because their returns have been at an all time low.

The common ground for borrowers and savers is things are reshaping, and with this in mind it may be prudent to move with it.

As far as borrowers are concerned it could be worth securing a fixed mortgage to help keep things as stable as possible for at least the next couple of years.

However, savers probably should not get into fixed accounts for too long as the likelihood is that more improved offers will be available in the not too distant future.