Bank moves could lead to increase in mortgages
Britain’s big lenders are planning to hike mortgage lending over the next three months as the Bank of England moves to ease credit conditions.
The central bank’s latest credit conditions survey – published yesterday – showed banks reported the biggest increase in the availability of mortgages during the three months to early September since the quarterly report began, and plan a further record rise.
However, most of the products were aimed at borrowers with large deposits and the Bank of England noted that credit-scoring criteria tightened over the quarter.
Meanwhile, the overall availability of credit to the corporate sector was reported to have remained unchanged for small, medium and large companies.
The Bank and the Treasury’s £80 billion Funding for Lending scheme was fired into action at the beginning of August to unclog the flow of credit to households and businesses.
On Tuesday, the Bank said it had seen an “early impact” of its scheme as borrowing rates begin to come down, but warned it might not be able to prevent total lending from falling over the next 18 months as wider global economic troubles continue to weigh on markets.
In yesterday’s quarterly survey, it predicted that mortgage availability would increase further over the next three months, including to borrowers spread across loan-to-value ratios.
Vicky Redwood, chief UK economist for Capital Economics, said: “Overall, the outlook for bank lending is better than it was a few months ago, helped by the latest policy initiatives.
“Nonetheless, we think it will be a long and slow process to get credit flowing freely around the economy again.”
She described the outlook for business lending as “less than encouraging” and added: “Even if banks make more credit available, households may not want to borrow more.”
Citi economist Michael Saunders said the report pointed to “mixed results” for the early impact of the Funding for Lending programme.
“The reading for availability of mortgage loans… is the best since this survey began in late 2007,” he said.
“However, the survey shows a slight deterioration in the availability of unsecured consumer loans and in business loans.”
Lenders quizzed for the survey said demand for credit from small and large businesses had recently fallen, while demand from medium-sized firms has held up.
A lack of merger and acquisition activity and capital investment, stemming from the eurozone crisis, were cited as underlying factors for the falls in demand.
Demand from people looking for a mortgage is expected to show a small uplift in the coming months, especially for buy-to-let mortgages.
The availability of non-mortgage lending to households is also expected to pick up “slightly” towards the end of the year, the report noted.
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