The government launched the Funding for Lending scheme in August last
year. It was designed to encourage banks to offer cheaper loans to
small and medium sized businesses. As a reward for offering cheaper
credit to businesses, the banks would then be able to take advantage
of cheap loans from the Bank of England.
Funding for Lending scheme extended
The Bank of England scheme has now been extended to accommodate
property investors. This means that any business with an annual
turnover of less than £25 million can lend money to landlords and
other property investors.
“It could be a no-brainer,” commented Rob Wood, chief UK economist at
Berenberg Bank. “Lend to a landlord – collateral easy to price – and
get 10 times that lending back as essentially free funding, then
recycle some of that back out again on mortgages or BTL.”
Landlords can widen their investment portfolios
Expansion of the Funding for Lending scheme is a great opportunity
for landlords to access cheaper debt and expand their investment
portfolios. Landlords have already been able to take advantage of
cheaper buy to let lending thanks to the Funding for Lending scheme.
Since last August when the FLS launched, the average rate on offer
for a buy to let mortgage has fallen from 5.09% to 4.28%. As a
result, buy to let lending has increased by 19% in the same period.
Criticism of the scheme
There has been criticism of the FLS, however, and some experts feel
that the government should be channelling more money into helping
first time buyers get a foothold on the property ladder instead.
