(Source: By Nick Goodway and Jim Armitage London Evening Standard — The Government today kicked off its pounds sterling 80 billion Funding for Lending scheme, its latest attempt to encourage banks to increase loans to homeowners and businesses, against a backdrop of bleak new figures on Britain’s manufacturing and housing markets.
Funding for Lending replaces the pounds sterling 20 billion National Loan Guarantee Scheme, which was only launched in March.
The programme allows banks which increase their lending to borrow money from the Bank of England at a discounted rate for up to four years.
It was launched as a survey showed manufacturing shrank at its fastest pace in more than three years in July, highlighting the perilous state of the economy and increasing pressure on chancellor George Osborne.
The boss of Britain’s second-largest housebuilder welcomed the programme. Peter Redfern, Taylor Wimpey chief executive, declared: “This could potentially have a significant effect on the housing market. It does really seem to give the banks an incentive to lend more rather than just bullying and goading them to do so.”
Ray Boulger of mortgage brokers John Charcol agreed: “The Funding for Lending Scheme is very quickly proving effective as far as the mortgage market is concerned.” The stimulus was launched as Nationwide, the UK’s biggest building society, said house prices fell 0.7 percent last month and are down 2.6 percent on a year ago.
Osborne hopes the plan will stimulate growth among British companies which have struggled due to the reluctance of banks to lend to them.
Today’s manufacturing numbers highlighted how ineffective government policies have proved. On a score in which anything below 50 marks a contraction, the Purchasing Managers Index registered just 45.4 in July against the previous month’s 48.4.
John Walker, chairman of the Federation of Small Businesses, said it was not yet clear how beneficial Funding for Lending would be for small firms.
©2012 London Evening Standard
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Source: By Nick Goodway and Jim Armitage London Evening Standard