Who is benefiting from the Funding for Lending scheme?

New research from a leading data analyst has found that high value mortgage borrowers have been the major winners of the government’s recent intervention in the mortgage market. The cost of loans for high net worth mortgage customers with high deposits has fallen drastically in the last year, with the average cost of finance now over 100 basis points lower than in 2012.

However, the government’s Funding for Lending scheme has been criticised by some experts for not helping those most in need. Indeed, new data shows that there are now fewer mortgage deals available at 95 percent lending than at the same time last year.

We look at the impact of government intervention and how it is affecting the high value mortgage market.

Funding for Lending helping high value mortgage borrowers

New research from Moneyfacts has found that the government’s Funding for Lending scheme (FLS) has led to a sharp increase in the number of large mortgage deals available in the UK. Across all loans-to-value, the number of mortgages on the market has increased by almost one quarter, with 2,872 deals now available.

The Daily Telegraph reports that ‘those with significant equity in their home have been the biggest beneficiaries of this FLS scheme.’ If you have 40 percent or more equity, the average interest rate charged has fallen from 4.37 percent last July to just 3.36 percent this month.

And, if you are a high net worth mortgage borrower you also have a much wider choice of products. Almost half of the mortgage deals on the market rare now restricted to those who have at least a 25 percent deposit.  37 percent of all deals are available at 75 or 80 percent lending and if you have a 20 percent deposit you will benefit from a deal at 3.73 percent, compared to 4.36 percent last July.

“I’m not sure that it was the intention of the scheme when it was launched, but it is clear that high net worth finance clients have been the biggest beneficiary of this government intervention,” said Islay Robinson, CEO of London mortgage broker Enness Private Clients.

“Not only have high value mortgage borrowers benefited from falling interest rates with deals over 1 percent cheaper than a year ago but there is also a much wider choice of products available,” he added.

While many low risk borrowers are benefiting, some experts have criticised the scheme for not helping those most in need, as we see next.

Just 54 deals available for first time buyers

Despite falling rates for high net worth mortgage borrowers, the choice of deals for first time buyers has actually reduced in the last twelve months. One year ago, there were 62 different deals available to homebuyers looking to borrow 95 percent. According to Moneyfacts, this figure has fallen to just 54 products, accounting for 1.9 percent of all mortgages on offer.

Sylvia Waycot, editor at Moneyfacts, said “It might have all been very different had Funding for Lending been specific in ensuring lenders lent higher LTVs.

“But, as the main proviso is that they simply increase their lending books, we are unlikely to see much change from the conservative lending model and one opportunity to make a difference to this important market is lost.”