The Bank of England will expand an £80billion scheme to increase the flow of cheap loans to households and businesses - and buy-to-let landlords are set to benefit.
Funding for Lending was launched in August to offer cheaper credit to cash-strapped small and medium-sized enterprises (SMEs) struggling to get funding in the wake of the financial crash.
Under Funding for Lending, every pound of additional net lending to SMEs for the rest of this year will entitle banks to £10 of super-cheap Bank of England loans.
Pay it forward: The Bank of England will allow business that borrow money under the Funding for Lending Scheme to pass it on to property investors. The scheme has been criticised as a desperate attempt to prop up the economy by Chancellor George Osbourne
Now these SMEs will be allowed to lend the money on to property investors.
Rob Wood, chief UK economist at Berenberg Bank, told the Financial Times that although the BoE's extension of the scheme was intended to boost lending to SMEs, it would also bolster the struggling housing market.
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HOW MUCH LENDERS HAVE RECEIVED THROUGH FLS COMPARED WITH NET LENDING
(These are the only lenders to receive FLS so far)
Source: Bank of EnglandLENDER
CUMULATIVE NET LENDING SINCE 30/06/12 (£m)
FLS DRAWING AS AT 31/12/12 (£m)
Aldermore
479
205
Barclays
5,701
6,000
Coventry BS
978
100
Cumberland BS
43
5
Julian Hodge Bank
25
18
Leeds BS
379
200
Lloyds Banking Group
-5,636
3,000
Metro Bank
93
29
Monmouthshire BS
37
5
Nationwide BS
3,600
2,010
RBS Group
-2,358
750
Santander
-6,308
1,000
Virgin Money
1,089
510
'It could be a no-brainer,' he said. 'Lend to a landlord ... and get 10 times that lending back as essentially free funding, then recycle some of that back out again on mortgages or BTL (buy-to-let).'
However, the scheme has been criticised for pumping money primarily into cheaper mortgages for those who already have large equity stakes, rather than into better rates for business loans or for first-time buyers that are struggling to meet tougher lending criteria from banks.
On Tuesday Chancellor George Osbourne was forced to deny he was panicking over the economy as the threat of a triple-dip recession loomed after rumours about the scheme's expansion emerged.
However, it was today revealed that the UK economy has avoided a triple-dip recession, growing by 0.3 per cent between January and March this year.
The economy was left on the brink of a triple dip recession, after output shrank by 0.3 per cent in the final quarter of 2012.
The better-than-expected figure means that the economy returned to growth this year, following a contraction in the final quarter of 2012, meaning the UK narrowly avoided its third recession since 2008.
Chancellor George Osborne said: ‘Today's figures are an encouraging sign the economy is healing. Despite a tough economic backdrop, we are making progress.’
He added: ‘We all know there are no easy answers to problems built up over many years, and I can't promise the road ahead will always be smooth, but by continuing to confront our problems head on Britain is recovering and we are building an economy fit for the future.’
Hair's breadth: Today's figures reveal the UK has avoided a third recession since 2008