Increase in mortgage approvals suggests ‘Funding for Lending Scheme’ is starting to work - ITEM Club
Nida Ali, economic advisor to the EY ITEM Club, comments on today’s lending figures:
- September's increase in mortgage approvals is encouraging and suggests that the FLS is beginning to have some impact
- The housing market has seen some positive developments in recent months, and we are optimistic about a gradual revival in the medium-term
- The strength in consumer credit is also welcome, but unlikely to be sustained in the coming months
“September's increase in mortgage approvals is encouraging, and suggests that the Bank of England's 'Funding for Lending' Scheme (FLS) may be beginning to have some impact. These figures support our view that banks see mortgage funding as a relatively low risk form of lending, particularly given that they haven't had their fingers seriously burned in the UK housing market in recent years. We expect it to be the most likely beneficiary from the FLS.
“The housing market has seen some positive developments in recent months. With banks having reduced their dependence on overseas and official funding sources to relatively small proportions, they are at last in a position to use their deposit inflows to boost domestic lending. As such we are optimistic about a gradual revival of the housing market in the medium-term.
“The increase in consumer credit is also very encouraging, but we are slightly thrown by the strength of the figures, which are reminiscent of the boom years. It is not clear why consumer credit should have increased so much in September and we expect this strength to unwind in the coming months.”