The Bank of England’s £80bn Funding for Lending Scheme (FLS), which gives lenders access to cheaper finance, helped mortgage lending reach an 11-month high in October.
According to figures from the Council of Mortgage Lenders (CML), there was a 4% increase in gross mortgage lending year-on-year to £12.9bn, demonstrating that the FLS is already having a positive impact on the lending landscape.
CML chief economist Bob Pannell said: “House purchase and remortgage activity both appear to have picked up recently, and this should be supported by an improvement in the availability and pricing of mortgages.
“The funding for lending scheme is likely to have made an early positive impact, helping to counter some of the negative pressures associated with a protracted and weak economic recovery.”
The latest lending figures go some way to negating the sharp fall in mortgage lending in October, when loans worth £11.4 billion were advanced, and return lending levels to the figure of £12.9bn reached in August.
Mark Harris, chief executive of mortgage broker SPF Private Clients, has said that as the FLS gains momentum banks will continue to step up the competition by attracting borrowers with lower deposits.
He said: “As lenders saturate the low loan-to-value (LTV) market with a plethora of rock-bottom rates, they will be forced to turn to the higher LTV bracket if they are going to do any significant levels of business, which will mean cheaper rates and more choice for first-time buyers in particular.”
Earlier this month, for example, the Co-op launched a mortgage with a 10% deposit, a market-leading rate of 3.99% fixed for two years and no set-up fees to pay, which it claimed was made possible by funding from the FLS.