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A shot in the arm or a shot in the dark?

Posted by: katalysis

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For some time the squeeze on mortgage availability has been one of the main obstacles to a return to a more normal housing market. We are now 4 years on since the collapse of Lehman Brothers and, if anything, credit market conditions have worsened once again as concern has focused on Banks’ exposure to the Eurozone. If the Banks can’t access the market for funds at a realistic price then what can you do? If you are the Bank of England the answer, it seems, is that you give the Banks some money at below market rates of interest in return for collateral such as….yes you’ve guessed it….existing debts owed by people who already have a mortgage! It’s called the Funding for Lending Scheme and is intended as a shot in the arm for the moribund mortgage markets. If it works then it should make credit more easily accessible and a bit cheaper for not only those who want to buy their first home but also frustrated second steppers.  
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