'Cheaper loans scheme is overdue boost to region'

The success of the Bank of England's Funding for Lending scheme is vital to the East Midlands economy, says a county accountant who has urged banks and businesses to participate.

The scheme was established last month to make it easier for banks and building societies to access funds which will let them offer better-value mortgages to homeowners and cheaper loans to businesses.

According to Mark Shires, senior partner at the PwC office in Castle Donington, the scheme could benefit the economy significantly.

Mr Shires said: "For some time, the cost of borrowing has been disproportionately high.

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"The rate of interest on a business loan is typically well above 5 per cent, whereas the base rate is stuck at its record low of 0.5 per cent.

"This situation has been holding back business investment.

"The Funding for Lending scheme is set to change this and it is good to see that some banks and building societies have already reduced mortgage rates.

"This move should help to encourage more housing market transactions and help to breathe life back into the construction sector, which has seen output plummet recently.

"We very much hope that demand for more cost-effective business loans will be strong, but this is by no means certain."