Thursday, August 02, 2012

UK launches cheap loan scheme

The Bank of England’s new Funding for Lending scheme has sharply reduced the cost of long-term, fixed-rate mortgages for borrowers with a minimum deposit of 40 percent.

Designed to give lenders access to funds at low interest rates, the scheme enables small businesses and households to take out loans at affordable rates.

The loans come with interest rates below three percent which is an “incredible rate by anyone’s standards”, according to Mark Harris, Chief Executive of mortgage broker SPF Private Clients.

“However, we don’t yet know whether the Funding for Lending scheme will result in cheaper mortgages at higher loan-to-values.”

“So far, the best deals have been for those with sizeable deposits, which won’t give the housing market the kickstart it so desperately needs,” Harris noted.

Earlier this year before the expiration of the stamp duty holiday for first-timers on 24 March, mortgage activity was better than the corresponding period in 2011. However, loan approvals in June were down 10 percent year-on-year to 44,192.

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