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Should Funding for Lending be cut back?

Should Funding for Lending be cut back?

The Bank of England yesterday made the surprise announcement that it was changing the Funding for Lending scheme (FLS) to focus on business not mortgage borrowers.

Fears of another "house price bubble" are said to have prompted the move.

Bank of England governor Mark Carney, said it was "no longer necessary" to support mortgage lending.

Carney said: "The changes announced today refocus the Funding for Lending scheme where it is most needed - to underpin the supply of credit to small businesses over the next year - without providing further broad support to household lending that is no longer needed.

"Since the FLS was launched it has contributed to a substantial fall in bank funding cost, this has fed through to a significant improvement in household credit conditions. Given this success there is no longer a need for FLS to provide further broad support to household lending".

Meanwhile Chancellor George Osborne said: "Small firms are the lifeblood of our economy. That's why we're reforming the banks, introducing the employment allowance and now focusing the Funding for Lending Scheme to support them."