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28 Nov 2013
BoE Carney shifts lending focus from home buyers to SMEs as house prices accellerate
FXstreet.com (London) - Bank of England governor Mark Carney today announced that the central bank would be moving to strongly rein in its policy to support mortgage borrowing as house prices begin to further accelerate.
The Bank of England launched the Funding for Lending scheme in June last year in tandem with the Treasury to prop-up lending to home buyers and small businesses.
Under the Funding for Lending scheme, banks and building societies are able to access cheap credit from the central bank as a carrot to encourage them to lend.
However, with the UK economy strongly outperforming forecasts, the BoE is set to pare the scheme back to focus on support for small businesses struggling to gain access to credit.
"Although the growth in household loan volumes remains modest, activity is picking up and house price inflation appears to be gaining momentum," wrote Carney in a letter to Chancellor of the Exchequer George Osborne.
"We should refocus the FLS so that it continues to support lending to the business sector, without adding further broad support to household lending at a time when that is no longer necessary."
The Bank of England launched the Funding for Lending scheme in June last year in tandem with the Treasury to prop-up lending to home buyers and small businesses.
Under the Funding for Lending scheme, banks and building societies are able to access cheap credit from the central bank as a carrot to encourage them to lend.
However, with the UK economy strongly outperforming forecasts, the BoE is set to pare the scheme back to focus on support for small businesses struggling to gain access to credit.
"Although the growth in household loan volumes remains modest, activity is picking up and house price inflation appears to be gaining momentum," wrote Carney in a letter to Chancellor of the Exchequer George Osborne.
"We should refocus the FLS so that it continues to support lending to the business sector, without adding further broad support to household lending at a time when that is no longer necessary."