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Sipp investors can use Funding for Lending to cut loan costs

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A J Bell says people who invest in commercial property through a Sipp or SSAS could save thousands of pounds by accessing a loan through the Government’s Funding for Lending scheme.

The Government launched the scheme in July. It 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. The Treasury hopes it will boost lending and cut rates on mortgages and small business loans.

So far, 13 lenders have signed up to the scheme. Royal Bank of Scotland, one of the largest signatories, has confirmed Sipps and SSASs that invest in commercial property will be considered for the FLS.

It says the scheme is limited to new loans, so Sipp and SSAS investors will not be able to refinance existing arrangements.

An RBS spokesman says: “We will consider Sipps and SSASs for Funding for Lending but each application will be considered on its individual merits.”

A J Bell technical resources manager Gareth James (pictured) says: “It is up to banks to decide who they are willing to make these loans available to and some may decide that they are only going to offer the loans to what you would consider to be a business in the ‘true’ sense of the word. I would class Sipps and SSASs as businesses.

“Funding for Lending deals are likely to include reductions in interest rates and waiver of arrangement fees so savings could amount to several thousand pounds for larger loans.”

Informed Choice managing director Martin Bamford says: “Sipp providers need to communicate to the different lenders on their panels to make sure they are aware that clients could benefit from improved borrowing rates through Funding for Lending.”

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