The government scheme that was put into place last August called the Funding for Lending scheme has helped to keep borrowing cheap for homeowners looking to remortgage as well as homebuyers.  The scheme allowed lenders to borrow from the government for their lending needs.  The interest rate from the government for lenders was remarkably lower than could be found on the global lending market. The scheme therefore allowed lenders to maintain low interest rates and keep funds readily available to meet demand from borrowers.

The scheme has brought more buyers to the housing market as demand has increased for purchase mortgages but it has failed to stimulate a boost in the remortgage lending market. Homeowners have not been as keen to take advantage of the historically low interest rates currently available on remortgage deals.

According to property services company LMS, the government should keep the Funding for Lending scheme in place due to remortgage lending declining. Data released from LMS revealed that remortgaging was at 24% of overall mortgage lending in February.  The overall lending value decreased 8% from £11.4bn to £10.5bn January to February.

LMS chief executive, Andy Knee said, “The government should extend the Funding for Lending scheme after figures revealed that remortgage lending in February fell by 11.3 per cent to £2.6bn.

“February’s monthly 11.3 per cent dip in remortgage lending can at least partly be attributed to a lull in remortgage applications in the Christmas and new year period.

“However the fact that it was still annually down by 1.8 per cent suggests that the Funding for Lending scheme still needs more time to bed in and we would urge the government to continue with the scheme in its current form. This is hopefully now looking more likely in light of the chancellor’s Budget statement.

“An extension of the scheme, together with continuing falls in mortgage rates for both new and existing borrowers, suggests that all types of mortgage lending should grow strongly in the coming months.”