Lloyds and RBS to increase mortgage lending to homeowners and SMEs

Posted under General by Alan

Following Northern Rock’s announcement of lending £14 billion over next 2 years, Lloyds banking Group and Royal Bank of Scotland (RBS) are also increasing mortgage loans to SMEs and homeowners in exchange for taxpayers’ assistance of £500 billion.

Lloyds and RBS are currently holding discussions with the Treasury whereby banks’ riskiest assets of billions of pounds would be underwritten by the Government.

The deal is likely to be finalised within a few days.

The Government is hoping that deal will push up new mortgage lending which in turn help boost housing market which has been adversely impacted amid lack of finance and continuously falling house prices.

Previous assistance in funding to banking sector did not boost lending but this time Government has forced banks to commit on how much extra loan they will provide to the borrowers. With this binding it is expected that housing market will get necessary push.

It is confirmed, through sources close to Lloyds and RBS, that they will be lending more than £20 billion each in addition.

Meanwhile, banks are also being persuaded to pass on interest rate cuts to the borrowers. Moneyfacts, in its recent survey revealed that only 31 lenders with variable rate mortgage, out of total 91, have declared that interest rates on their schemes will be lowered following announcement of 0.5% cut on the Bank of England base rate.

More