FSCS scheme 'may lead to rise in mortgage costs'

Date:Tuesday 26th May 2009
Author: Max Freedman

Building society executives in the UK have expressed a belief that the Financial Services Compensation Scheme (FSCS) may lead to a rise in mortgage costs.

The scheme exists to reimburse people who lose money when financial institutions collapse.

It is funded by a levy which is placed on all financial service providers.

A survey conducted recently by the Building Societies Association found that 60 per cent of building society chief executive officers (CEOs) believed that they may have to increase the mortgage rates they charge in order to offset to cost of the scheme.

The poll also found that the CEOs forecast net lending to fall by an average of 22 per cent this year.

BSA director-general Adrian Coles commented: "The next year is not seen as a period of growth, but a time when balance sheets can be strengthened and the business primed to take advantage when market conditions become more favourable."

Meanwhile, figures released this month by the Council of Mortgage Lenders revealed that its members provided a total of £10.4 billion in mortgage lending during April.