The Funding for Lending scheme should not be written off as a white elephant, says the Intermediary Mortgage Lenders Association.
But executive director Peter Williams told Introducer Today that there certainly would be questions that needed answering if in the months to come the amount of funding accessed still outweighs new mortgage lending.
He was responding after the Bank of England’s figures last week showed that net lending was only £498m, despite a total drawdown of over £4.3bn.
The figures also showed that only six banks and building societies out of the 35 lenders participating in FLS had accessed the funds.
The data drew fierce criticism that the six, which included two bailed-out banks, Lloyds and RBS, had sucked a net £1bn out of the economy in the three months to the end of September.
Labour called the figures disappointing, and one critic, Christopher Shaw of finance provider Platform Black, said: “The choice of name has proved to be unintentionally ironic. The funding is there all right, but there’s precious little lending going on.
“What launched as the Bank of England’s great white hope risks looking like a white elephant.”
But Williams said: “It is understandable that, with mortgage lending having slumped so dramatically in the recent past, there is an eagerness to see the trend reversed by the Government’s Funding for Lending scheme.
“What has emerged so far falls a long way short of transforming the outlook for the market, but total net lending has risen, competition has increased and there are signs of movement in the right direction.
“The FLS has more than a year to run: ample time to see the early momentum built by the six active participants seized by other lenders from its 35-strong membership.
“Focusing on the modest growth of 90%-plus loan to value (LTV) mortgages shows only part of the picture, when the total number of mortgages increased by almost 20% in the first three months of the scheme.
“The FLS membership, just like the IMLA membership, is made up of lenders of varying sizes. Some have been quick to engage with the scheme, but not all will be in a position to do so immediately.
“Clearly there will be questions to answer if, further down the line, we still see that the amount of funding accessed outweighs new mortgage lending. But in this early stage, we should be doing everything to encourage participation rather than writing off the scheme.
“As 2013 approaches, the mortgage market is showing signs of recovery. With more applications and approvals filtering through, we will surely see the injection of some billions of pounds aiding that process.”
One of the six that participated in the drawdown of funds was Leeds Building Society, which accessed £100m and reported delivering positive net lending of £212m.
Paul Riley, group treasurer at Leeds Building Society, said: “When you look at the net lending numbers, we have contributed strongly.
“During the past 18 months, we have agreed new mortgages totalling £2bn, well above our natural market share, and we intend to continue to grow our business organically.
“Whilst it is early days for the scheme, we have strong lending aspirations and will use the FLS to draw down more funding to support it. This means that we will be able to help first-time buyers on to the housing ladder and even more borrowers achieve their goal of home ownership, which we see as an important contribution to supporting home ownership, the housing market and the wider economy.”