The Funding for Lending scheme is causing a lack of new issuances in the residential mortgage-backed securitisation market and should not be extended beyond its January 2014 end date, according to Home Funding chief executive Tony Ward.
The last major RMBS was Virgin Money’s £2.6bn issuance in November, three months after the Funding for Lending scheme came into force.
Ward says the scheme has created an alternative funding source for lenders, making the RMBS market “very quiet”.
He says: “No one is going to the debt markets when they have the funding for lending scheme to fall back on right now.
“The FLS is due to be withdrawn in January 2014 and I would quite like it to be withdrawn because we need to get the debt markets functioning again and cannot be forever relying on Government bailouts.”
Clifford Chance partner Emma Matebalavu says: “There have been fewer new issuances this year and the FLS is a factor but I do not think it is the only reason.
“Last year there was a lot of issuance and a lot of institutions filled their funding requirements, especially as some banks are also shrinking their balance sheets, reducing their funding need. Others are also diversifying between wholesale and retail funding.”
A Council of Mortgage Lenders spokesman says: “Lenders have a range of funding options through retail deposits and funding for lending now coming into the mix. It creates an option that did not exist before last summer.”