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BoE reduces mortgage lending support scheme Mortgage lending support scheme to be reduced
(35 minutes later)
The Bank of England is to scale back a scheme to boost mortgage loans, focusing instead on business lending. A government-backed scheme to boost mortgage loans is to be scaled back, focusing instead on business lending.
The Funding for Lending Scheme, launched last year, will no longer be aimed at householders, said the Bank's governor Mark Carney on Thursday. The Funding for Lending Scheme (FLS), launched last year, will no longer be aimed at householders, announced the Bank of England's governor Mark Carney on Thursday.
An overheated housing market would be a risk to the economy, he said, presenting the Bank's Financial Stability Report. An overheated housing market would be a risk to the economy, he said, adding that prices are rising in many regions.
Supporting mortgage lending was "no longer necessary". Supporting mortgage lending was "no longer necessary", he said.
However, speaking about another mortgage scheme, Help To Buy, Mr Carney added that it was "still early days".However, speaking about another mortgage scheme, Help To Buy, Mr Carney added that it was "still early days".
Funding for Lending will be refocused on businesses from January 2014, the governor said.Funding for Lending will be refocused on businesses from January 2014, the governor said.
Chancellor George Osborne said: "Small firms are the lifeblood of our economy. That's why we're reforming the banks, introducing the employment allowance and now focusing the Funding for Lending Scheme to support them."
Housing bubble?Housing bubble?
Chancellor George Osborne said: "Small firms are the lifeblood of our economy. That's why we're reforming the banks, introducing the employment allowance and now focusing the Funding for Lending Scheme to support them."
Funding for Lending aimed to provide up to £60bn to banks and building societies so long as that money was lent to businesses and individuals.Funding for Lending aimed to provide up to £60bn to banks and building societies so long as that money was lent to businesses and individuals.
Mr Carney said: "The changes announced today refocus the Funding for Lending scheme where it is most needed - to underpin the supply of credit to small businesses over the next year - without providing further broad support to household lending that is no longer needed."Mr Carney said: "The changes announced today refocus the Funding for Lending scheme where it is most needed - to underpin the supply of credit to small businesses over the next year - without providing further broad support to household lending that is no longer needed."
He added: "Since the FLS was launched it has contributed to a substantial fall in bank funding cost, this has fed through to a significant improvement in household credit conditions. Given this success there is no longer a need for FLS to provide further broad support to household lending".
'Not a shock'
In response to the news, the Council of Mortgage Lenders said that decision reflects the "improvement in funding market conditions".
The group's director-general Paul Smee said: "Although the changes to the FLS may be a surprise, they are not a shock. Mortgage lenders are well equipped to meet their funding needs, as wholesale funding market conditions have improved and retail deposits are robust."
Mr Carney added that he sees a higher risk to financial stability if there are further rapid rises in house prices, and there were signs of house price growth picking up beyond London.Mr Carney added that he sees a higher risk to financial stability if there are further rapid rises in house prices, and there were signs of house price growth picking up beyond London.
Concerns over a potential property market bubble have been growing, and earlier this month a committee of MPs asked the Bank of England to clarify its role in policing the Help to Buy scheme.Concerns over a potential property market bubble have been growing, and earlier this month a committee of MPs asked the Bank of England to clarify its role in policing the Help to Buy scheme.
The Treasury Committee said that the "scope and limits" of the Bank's role were not clear.The Treasury Committee said that the "scope and limits" of the Bank's role were not clear.