Mon, 25 Jun 12
CEBR Chief Executive Douglas McWilliams, offers his view on the latest initiative from the Bank of England.
The Governor of the Bank of England made the more important speech at the Mansion House.
Normally the Chancellor takes the headlines, but his announcement that he is going to implement a watered down version of the Vickers report to regulate banks was hardly impressive. Also, it is not clear that a new framework which will cut bank lending and add to the costs of banking for each household by up to £250 a year is exactly what is needed as the economy slithers further into crisis.
So the Governor indicated that up to £140billion of what is effectively another form of QE more closely targeted at bank lending would be made available.
The Treasury have indicated that they think that the scheme will be a success if it leads to an additional £80 billion of lending. Although the BBC was full of siren voices predicting failure.
It is doubtful that the mechanism will have more than a marginal impact on most forms of corporate lending. But it might have an effect in two areas: commercial property and home mortgages.
By making mortgage lending more easily available, it will be possible for lenders to edge up loan to value ratios which could slash the deposits required from first-time buyers by as much as a quarter.
See also: Mortgages
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