tony's blog

Tuesday, January 22, 2013

A good idea but not necessarily the panacea

I see more scepticism in the press today about how effective the Government’s Funding for Lending Scheme (FLS) has been. According to recent statistics from a report by the Bank of England, lending to British companies by banks and building societies fell by £4 billion in the three months to November. Commentators are suggesting that the ‘jury was still out’ as to whether the FLS was bringing down bank loans as quickly as had hoped. What can be said of the scheme is that it has led to significant declines in the cost of funding to banks and financial institutions seem to be willing to ease borrowing rates among consumers. Availability of credit to households has increased plus rates on fixed rate mortgages have dropped so that has to be good news.

It’s not therefore lack of credit that’s an issue. It’s a much wider problem of subdued demand. Lenders report that a lack of confidence among businesses was affecting their appetite for debt.

From my previous blogs you know that I’m a big supporter of the Funding for Lending Scheme. It certainly improved mortgage approval figures at the back end of last year and will most likely have an impact on the level of gross lending going forward, driving many analysts to make bullish predictions for the mortgage market in the year ahead.

However there’s only so much this initiative can do. On its own I can’t see that it is going to solve the Chancellor’s problems as to how to unblock the corporate credit market. He has to suggest ideas that can rebuild confidence in a still very subdued market. Thinking caps on!

Friday, January 18, 2013

same old same old...

Once again we have conflicting data reported by commentators regarding house prices for 2012.
You have the Office of National Statistics (ONS) suggesting house prices increased by 2.1% on the year to November against both Halifax and Nationwide’s view reporting house prices fell by 0.3% and 1% on average in 2012. So who’s right?

Maybe this is inevitable as it is well know that the ONS, Halifax and Nationwide have different ways of recording the data so you can argue that there are bound to be variations. Having said that, I would expect the trend to be similar amongst housing economists and I’m not sure this was always the case last year.

So house prices up or down for 2013? Well some cheery news from the Royal Institution of Chartered Surveyors (Rics) reporting that members believe that house sales will rise in the first three months. Some surveyors seem to be so bold as to suggest that in some parts of the country we are indeed ‘over the worst’.   Well apart from London and the South East which has always reflected something of a price bubble I’m not so sure that these predictions can be validated elsewhere. Whilst it’s true that unemployment is falling, the economy remains depressed with confidence running low and limited growth in wages expected. So being more realistic, I truly believe that the property market will remain tough for 2013.

 Having said that I really think that the Funding for Lending Scheme is starting to do its job and increase the availability of mortgages which is no bad thing. Also lenders are starting to look at assisting first-time buyers with increasing their product ranges to incorporate higher LTV loans. So the supply is there.

 I’m just not so sure if the demand will match it.

Thursday, January 10, 2013

Three cheers for Barclays!

I think it was way back in October last year that I wrote about the need for lenders to look at developing more innovative products in the first-time buyer arena. This was amidst a set of depressing statistics which suggested that it can take up to eight years for the average first-time buyer to save up for the required 20% deposit.

Whilst the Funding for Lending Scheme has proved to have made a positive impact in terms of increasing mortgage availability, with a 26% net balance of lenders reporting a rise in lending, it has done little to assist the more ‘risky’ high end LTV borrowers (notably first-time buyers). Lenders on the whole have admitted to ‘cherry picking', remaining cautious about who to lend to

So hats off to Barclays then for coming up with a product that really seems workable for this target market. Without going into too much detail, it means that provided parents can stump up 10% of the asking price of the property, their children will need to put down only a 5% deposit to qualify for the mortgage. The ‘Springboard’ mortgage will be available from next week and I think it will be appealing to the Bank of Mum & Dad. Why? I think the fact that to access this deal requires a significantly smaller savings vessel is attractive to the ‘squeezed middle’ unlike other schemes which have gone before which have require a much greater input.

This will hopefully open the floodgates to other schemes becoming available. After all this is the market which needs the most amount of help.