More money to be released to support lending for UK homes and business

Taylor Scott International News

The property lending industry has welcomed an announcement from the Chancellor of the Exchequer and leaders of the UK’s main lenders that extra capital is to be made available to support business and households due to the current economic challenges. Chancellor George Osborne has already said that the economy is facing a lot of challenges as the result of the decision to leave the European Union and now after a meeting with the governor of the Bank of England and leading lenders he has sought to reassure the industry that money will be available for property lending in the commercial and residential sectors. This will allow banks to release £5.7 billion from their regulatory capital buffer to support lending. ‘While we are realistic about the economic challenge facing the country after the referendum result, we are reassured that collectively we can rise to it,’ said Osborne. ‘The last time Britain faced an economic shock the banks were at the heart of the problem. Thanks to the hard work of rebuilding the banks, making them stronger and safer, and the arrival of new challenger banks, banks and building societies are now part of the solution,’ he pointed out. ‘The government gave the Bank of England new counter cyclical capital buffer powers to support lending in the financial system in the good times and bad. The independent FPC of the Bank of England have today used those powers,’ he explained. He added that the extra capital is now available to support lending to UK businesses and households and he called for a joint national effort to meet the economic challenge. It is a major change and means that three quarters of UK banks accounting for 90% of lending will immediately have greater flexibility to supply credit to UK households and firms. To achieve this the Financial Policy Committee within the Bank of England cut what is known as the UK countercyclical capital buffer rat' from 0.5% to 0% per cent of banks’ UK exposures with immediate effect. It means that lenders have extra money to fund mortgages and corporate loans and this zero rate will apply for the next 12 months, at the end of which the Bank will reassess. The Bank of England also published its Financial Stability Report, which revealed concerns about the growing amount of debt households are carrying. ‘Survey evidence on the housing market has been difficult to interpret in recent months because of the impact of the pre-announced increase in stamp duty on additional properties which took effect in April,’ the report said. The report also warned of the potential for buy to let investors to sell up and flood the market with properties which could push down prices down and indirectly hit owner-occupier households' wealth. It explained that there is a risk that people could be more likely to lose their jobs or fail to find one following the referendum. ‘The ability of some households… Taylor Scott International

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