A new survey released on Wednesday by the Bank of England has shown that British lenders fully expect a significant increase in the availability of mortgages and a better supply of business loans, a sector that hasn’t seen as much of a drastic rise, throughout 2014.
The Credit Conditions Survey, carried out quarterly by the Bank of England showed that the demand for secured lending by households – essentially mortgages – grew at its fastest rate since the survey first began in 2007. “Lenders expected the availability of secured credit to significantly increase in 2014 (Q1), including those borrowers with a LTV (Loan to Value) ratio above 75 per cent and 90 per cent” – the Bank of England said.
In October 2013, the Chancellor George Osbourne brought forward the second phase of the Help to Buy scheme with the aim of helping potential homeowners get onto the property ladder with a deposit of as little as 5% of the property value. So far, in its first three to four month period, the scheme has seen 6,000 completed mortgage applications between October and the end of December 2013.
In comparison, mortgage approvals that do not use the Help to Buy scheme are still running at around 70,000 per month.
Further information in the BoE survey showed that lenders also expect the spreads on mortgage rates to fall further, if only slightly, over the next 3 months. This should bode well for consumers as lenders fighting to secure customers should offer more competitive products direct to the market and through brokers.
Business lending is also on the up, with the BoE survey showing that the availability of credit to the corporate and commercial sector increased noticeably in the final quarter of 2013, assisted by the steadily improving outlook for the UK’s economy and perhaps more so the competition among banks and from capital markets.
The lack of credit and lending for businesses has long been seen as a cause for concern with regards to the economic recovery in the UK. To combat this, in November the Bank of England and the Government agreed to redirect the focus of their joint Funding for Lending Scheme away from the mortgage market with a view to encourage lending to businesses.
The BoE survey was conducted between November 11 and December 2, 2013.
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