Funding for Lending Cap
The race is on to beat the Government’s Funding for Lending Cap on Specialist Contractor Mortgages. The Government had loaned the big lenders funds so that they could loan money to businesses to help the country out of the downward spiral.
Banks hadn’t been lending, which was hitting the economy, so the Government stepped in to guarantee loans to small businesses.
However, instead of using that money to loan to small businesses, the bulk of the money was used by the banks to fund mortgages.
Help to Buy
The Government exacerbated this by the launch of the Help to Buy. The Government would guarantee 15% of a 95% loan to those buying new houses. This was to help boost both the construction industry and the housing market. It also brought first time buyers into the market for the first time in years.
They have extended it to all buyers now. It was supposed to come in during January but they brought it forward 3 months to October. Tony Harris, a mortgage broker for many years in the contractor market, saw a steady flow of contractors taking up specialist contractor mortgages deals.
House prices have started to rise boosted by more buyers entering the market.
End of Funding for Lending
Now, shortly, the Government will pull one of the planks away. In February, the Government will bring in a Funding for Lending Cap for lenders giving mortgages. They will still be able to tap Funding for Lending to loan to small businesses but not to those wanting to buy houses.
There will still be the other pillar of Help to Buy but there will be less monetary help from the Government in terms of Funding for Lending. There is still, of course, a window of opportunity between now and the start of February. It is predicted that loan rates may rise after that. That’s because there will be less money to loan to the same amount of mortgage seekers.
Contractor Mortgages are still available at the old rates. Lenders can still tap that money for now – but the window is closing.
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