BoE's Funding for Lending Scheme aids buy-to-let landlords

N.R. | ShareCast | 25 Apr, 2013 12:37 - Updated: 13:24 | | |

Harry Potter

The Bank of England (BoE)’s Funding for Lending Scheme will provide a major boost to the property market through supporting buy-to-let (BTL) landlords, the Financial Times reported Thursday.

The BoE has given the green light for banks to access its new funding programme to lend to property investors.

The scheme offers aid to small and medium sized businesses (SME), which are defined as companies with an annual turnover less than £25m.

While it is intended to bolster SMEs, it will also help drive the housing sector. The sector has already reaped the rewards of lower borrowing costs from banks.

The average buy-to-let rate has fallen to 4.28% from 5.09% in August when the FLS was launched, data from Moneyfacts showed. Subsequently, buy–to-let mortgages reached its highest level in four years as buy-to-lending grew 19% last year.

"It could be a no-brainer," said 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."

FLS is the only government scheme that has not specifically excluded buy-to-let investors despite various incentives aimed at replenishing the housing market.

RD

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