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IMLA: Funding for Lending distorting competition in the market

The Intermediary Mortgage Lenders Association has criticised the Government for not doing enough to include smaller lenders and non-banks in its Funding for Lending scheme, saying it has distorted competition in the market.

Last month, the Bank of England revealed 13 firms accounting for 73 per cent of all UK lending are involved in the £80bn scheme.

The scheme allows banks and building societies to exchange existing loans for Treasury bills, on which they will pay an interest rate of 0.25 per cent over the next 18 months. Participating lenders can borrow up to 5 per cent of their stock of existing lending. Participants must be signed up to the discount window facility, a liquidity insurance measure run by the Bank.

IMLA executive director Peter Williams (pictured) says not enough is being done to include smaller lenders and non-banks.

He says: “Previously, the Bank of England has been very protective about who can sign up to the discount window facility so it has discouraged lots of building societies in the past. It is now trying to more actively encourage smaller lenders to join but there is a long way to go to achieve universal sign-up across the building society sector. The Government talks constantly about a level playing field but competition is distorted.”

A Bank of England spokesman says it has actively encouraged smaller lenders to sign up to the scheme.

He says: “We gave a presentation to the BSA in early September to encourage everyone who wants to be involved to come forward. We have also given three open seminars at the Bank on how to apply.”

Williams says the Bank has referred IMLA to the Treasury to discuss including non-banks in the scheme.

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