Treasury seizes on signs of life in the mortgage market as evidence that its radical funding for lending (FLS) scheme is working
The Treasury has seized on signs of life in the mortgage market as evidence that its radical funding for lending scheme (FLS) is working.
The Bank of England’s latest quarterly credit conditions survey, conducted in August and early September, showed a “significant” increase in the availability of secured lending, including mortgages.
“The Bank’s figures today show that the number of mortgages out there for people looking to buy a home has increased significantly over the last three months, and that the Funding for Lending Scheme will help ensure that this continues in the coming months,” said a Treasury spokesman.
The balance of lenders reporting an increase in mortgage availability was the highest since the survey began in 2007.
The rise was strongest among buyers with a deposit of less than 25% of the value of their home – those who have often struggled to borrow in recent months.
However, shadow business secretary Chuka Umunna pointed out that the bank said there was no evidence that more credit is flowing to businesses — the borrowers George Osborne is keenest to help.
“Firms across the country have been crying out for finance for many months and we hope the scheme does not go the way of ministers’ Project Merlin and credit easing schemes, that failed to increase access to finance for businesses in the way hoped,” he said.
Malcolm Barr, UK economist at JP Morgan, said: “The sharp move up in actual and expected mortgage availability will cheer the monetary policy committee, though [they] will wonder why the impact of the scheme should appear to be so asymmetric across sectors,”.
September sales boost
A separate survey released by the CBI shows that retailers saw a modest increase in sales in September after a dismal August when sales were affected by the Olympics, as consumers stayed at home to watch the Games.
The CBI’s latest distributive trades survey showed that 33% of retailers recorded rising sales rising in September, while 27% saw a fall.
The positive balance of +6% was stronger than the -3% of August. The CBI added that retailers were also expecting stronger demand in the month ahead, boosting hopes that the economy could bounce back to growth in the third quarter of the year.
Howard Archer, of the consultancy IHS Global Insight, said: “Given the importance of consumer spending to the economy, this supports hopes that GDP growth in the third quarter will more than offset the 0.5% quarter-on-quarter contraction suffered in the second quarter when it was hit by special factors (the extra day public holiday and wet weather that hit construction and retail sales).
“The CBI survey also lifts hopes that the economy is seeing modest underlying growth.”
Chris Williamson, of the data provider Markit, said: “Ongoing retail sales growth should help to drive economic growth and raises the likelihood that the UK has risen from its double-dip recession in the third quarter and, from a consumer angle at least, will start the fourth quarter on a reasonably sound footing.”
Official figures due to be released on Thursday are expected to show that the economy contracted less sharply in the second quarter of the year than the Office for National Statistics’ previous 0.5% estimate.
Analysts are also keenly awaiting the first signal of whether the economy expanded in the third quarter of the year, bringing the double-dip recession to an end. The first estimate of third-quarter GDP will be published late October.
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