Lenders are expecting a moderate increase in demand for secured loans for house purchases over the next three months.
The industry was taken aback by the significant decline in demand in the last quarter of 2014, as expectations were for a rise. The net percentage demand balance was the lowest since the third quarter of 2008, the latest Credit Conditions Survey of Bank of England shows. Demand for both prime and buy-to-let lending slumped in the three months to early December.
Secured credit availability grew slightly in the fourth quarter of last year and is expected to remain unchanged in the first three months of 2015, lenders said.
While, as a whole, the industry’s willingness to provide credits to households was high, lenders were not keen on closing many deals at loan-to-value ratios (LTV) above 90%. The maximum LTV ratios were flat in the fourth quarter. Maximum loan-to-income (LTI) ratios, however, saw a notable drop over the period and are expected to continue to decline in early 2015.
Another significant decrease was recorded in the spreads on mortgage rates. Lenders expect a continued fall in spreads in the next three months as well as market competition grows.
Unsecured credit lending to households in expected to increase in the first quarter of 2015, boosted by market share objectives. Unsecured loans provided to households were on the rise at the end of 2014 as well, which was explained with the changing appetite for risk.
Overall credit availability to both the corporate and commercial real estate sector was unchanged in the fourth quarter of last year and is expected to stay flat in the first quarter of 2015.
The quarterly BoE survey was conducted between 10 November and 1 December 2014.
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