Peter Williams, executive director of the Intermediary Mortgage Lenders Association, said: “After weeks of speculation we welcome the confirmation that the Bank of England is extending the FLS until January 2015.
“But while supporting lending to small and medium-sized enterprises is vital to the economy we are concerned that targeting the revised scheme towards UK businesses could limit the gains for the mortgage market.
Williams warned that by incentivising SME lending there is a real danger that the continued need to boost the supply of funding to the housing market could be over shadowed.
Williams continued: “Although the equity loan element of Help to Buy is already ‘live’ the mortgage guarantee scheme does not begin until January 2014 and it can take months for initiatives like these to become fully operational. The last thing the market needs is an artificial ‘stop-start’ momentum.
“The FLS has certainly improved the availability of mortgage credit but there is significant untapped demand for higher loan-to-value lending.
“We have consistently called for the inclusion of specialist lenders in the scheme alongside banks and building societies, to take advantage of their innovative approach.
“Extending the FLS is an important development and we await further detail and discussions with the Bank around the role of non-banks not least to ensure a fully competitive mortgage market.”
Paul Hunt, managing director of Phoebus Software, was optimistic following the decision and praised the response of lenders following a turbulent period in the market.
Hunt said: “The extension of the Funding for Lending Scheme is a source of optimism for banks and building societies, providing a strong foundation for growth in the mortgage market.
“In the face of a weak economy lenders have been pro-active in their approach and now the extension of this scheme will further open up the finance markets to a wider range of mortgage borrowers and small businesses.
“Rates will become increasingly competitive, driving continued strong improvements to lending levels throughout 2013.”
Andy Knee, chief executive of LMS, was also optimistic following the decision from the BoE.
Knee said: “We are pleased that the BoE has chosen to extend its FLS for a further year although we are sure that their decision to focus on SMEs will be the subject of much debate.
“The scheme can already be credited with generating some excellent deals for homeowners with healthy levels of equity.
