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FLS Change Direction

Written By On 28/11/2013

The Bank of England Governor announced earlier this morning that they intend to shift the Funding for Lending Scheme's emphasis from helping home owners to helping small businesses obtain loans.

Mark Carney feels that this is the correct way to go in order to stabilise property prices as the FLS, which was launched fifteen months ago, has now given the housing market the boost that was needed at the time.

He was submitting the Bank's Financial Stability Report and said it is scheduled to take place as early as January.

Mr Carney who is chairman of the Bank’s Financial Policy Committee said that the Bank will no longer be offering financial institutions preferred rates on loans, in order that they will be passed on to households.

They will however be offering them to encourage loans to small businesses.

Mr Carney thinks that 'household lending is no longer necessary'. He added

Over the past year the Funding for Lending scheme has contributed to the recovery by helping to significantly improve credit conditions, especially for households. The changes announced today refocus the FLS where it is most needed.

The decision appears to be moving in a completely contrasting direction to that of George Osborne, as this avenue could possibly put a brake on lending as far as mortgages are concerned, and lenders to increase their rates, whilst the Treasury are pushing Mr Osborne's Help to Buy scheme in order to do the opposite.

Shares for house builders have already began to fall sharply on the news.

However, the Chancellor said that he agrees with the FPC as he stated that 'small firms are the lifeblood of our economy.'

Mr Osborne said

Now that the housing market is starting to pick up, it is right that we focus the scheme’s fire power on small businesses.

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