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Lenders Expect To Make More Credit Available: Boe

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The Bank of England’s (BoE) latest Credit Conditions Survey has revealed lenders expect to make credit more readily available to households and businesses over the next three months, after increasing lending over the last quarter.

Mortgage Solutions trade mag

This has got me a bit worried, if lenders start offering 90%, 95% or even 100% mortgages all the people who are locked out becasue they dont have a deposit are going to pile in.

This is my main reason why I think prices will contiue to fall due to restricitions on credit but if that changes prices could rise as more people can access the market.

Edited by buytoilet
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I think this Reuters article clarifies things.

Unless I'm told specifically how this credit is measured, I treat any such reports with a healthy dose of scepticism.

Thanks for the link always good to have an article that helps put things in perspective.

LONDON (Reuters) - Lenders expect to make credit more easily available to households and businesses over the coming quarter but are not expecting much of a pick-up in demand, a survey by the Bank of England showed on Thursday.

The quarterly credit conditions survey showed government initiatives to boost lending had enjoyed some success -- secured credit to households increased in the second quarter for the first time since the third quarter of 2007.

But lenders expected spreads on new mortgage lending to remain wide, meaning borrowers would not see the full benefit of record low interest rates. And spreads on corporate lending were expected to widen further.

"While there are some encouraging signs in the credit conditions survey, the UK is certainly not out of the woods yet," said Colin Ellis, an economist at Daiwa.

"As long as credit scores continue to tighten, that will make it harder for households to get funding, which is likely to restrict activity, particularly in the housing market, for some time."

.................Economists are split on whether the central bank will extend its QE programme but all agree that credit conditions will be key to that decision.

Although mortgage approvals have picked up from record lows hit last year, hard indicators of lending remain weak. David Miles, a new recruit to the central bank's monetary policy committee, noted that bank lending remained low and a sustained pick-up was not guaranteed.

"The prospect of a rapid return to growth doesn't seem a highly probable outcome. But there are reasons for thinking the period of rapid declines in output are behind us," Miles told a Treasury committee.

The BoE survey noted that concerns about the economic outlook had continued to bear down on credit availability in the second quarter, but the impact had been less than in previous quarters and lenders had expected to increase credit further in the coming quarter.

However, while lenders expected demand for loans from small businesses to pick up, they did not expect any increase in demand for mortgages.

There was also an expectation that default rates would continue to rise and little appetite to cut spreads -- the margin over the Bank rate that lenders charge for credit.

"The survey was not overly encouraging about the outlook for bank lending and therefore the prospects for overall economic growth," said Vicky Redwood at Capital Economics.

"The improvement in the balances may just have reflected the lending commitments made by lenders participating in the Asset Protection Scheme, rather than a fundamental shift in lenders' risk appetite."

Somebody asked a few weeks ago in relation to the article about there being 97% fewer mortgages available for FTB's looking for a high LTV, :

Ray Boulger, of mortgage broker John Charcol, said the increase in price had been driven by a lack of competition and by new rules under which lenders have to set aside more capital to cover high loan-to-value mortgages. "The cost to the lender of making one 90% LTV loan available can be four or five times the cost of offering a mortgage at 60% LTV," he said. "We're in a situation where the more lending a lender does at 90% the less lending they are able to do overall."

....does anyone know how much capital has to be set aside to cover high ltv's?

The person that asked the "Q above, posted this interesting link from Times dated April 2003 :

Mortgage Lending Considered Low Risk Despite Crash Fears

Edited by Sybil13
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