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Funding for Lending plan could benefit first-time buyers

Lorna Bourke considers the impact of government emergency lending plans on the mortgage market.


by Lorna Bourke on Aug 01, 2012 at 09:01

Lending criteria remain tough

Announcing FFL, chancellor George Osborne said he hoped the scheme would ‘make mortgages and loans more easily available’. However, the lenders’ appetite for risk has not changed, so although more mortgage money may be on offer, borrowers may still find things difficult. 

Boulger sees no easing of affordability criteria or credit requirements. ‘Before the credit crunch Santander, for example, was one of the most accommodating. It would consider applications from borrowers with County Court Judgments up to £3,000. Now, something like one missed credit card payment results in automatic rejection.’ 

He advises applying to ‘some of the smaller building societies and banks like Metro Bank, which will consider individual cases on merit.’ In other words, these lenders individually underwrite applications rather than a computer saying ‘no’.

Hollingworth takes a similar view. ‘Deposit will remain key to the options available and the tiering of rates to equity will be a feature of the market for the foreseeable future. There is not likely to be any significant loosening in criteria and there even continues to be some tightening around aspects such as interest-only loans.’ 

So how will we know if the scheme has been a success? Even the Bank of England acknowledges that ‘it will be difficult to quantify the exact impact because we cannot know what would have happened in its absence’.

‘The real point about FFL is that it would make loans cheaper and more readily available than they might otherwise have been,’ Clarke said. But he warns homebuyers not to expect too much. ‘It is far from being just about mortgages and there are no specific targets for mortgage-directed lending.’

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2 comments so far. Why not have your say?

C Cloy

Aug 06, 2012 at 15:36

What is needed to assist FTBs is a massive reduction in house prices! This would happen if a Rent Act was introduced or if the Treasury imposed greater taxation on landlords. However house prices are only likely to fall if we have a major recession. I would prefer it, if the Goverment took up my one or more of my initial suggestions but I will probably have to wait for a major recession which will hopefully happen when the Euro breaks up!

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Aug 08, 2012 at 17:26

Does anyone understand why GW Pharmacuticals share price is constantly falling? Set against this they ar continually gaining extra regulatory approvals and I have yet to read an @expert' report recommending anything less than hold.

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