The risk that UK lending will be tightly constrained over the next three months has been overstated in The Bank of England’s Q2 2010 Credit Conditions Survey, said Ray Boulger, senior technical manager at broker Charcol.
Following the media reaction, he said: “Reading some of today’s media headlines one could be forgiven for thinking that mortgage lending is about to collapse.”
“Conditions in the wholesale money markets have tightened and this is what is causing lenders to be cautious about the volume of lending in Q3,” he said.
But the furture Sterling money markets do not reflect these fears and Boulger said it had seen no evidence that lenders have less appetite to lend.
“As the typical timeframe from application to completion is 10 – 12 weeks even if the market were to suffer a major shock next week it would have very little impact on mortgage completions until Q4. Most of the major lenders plan to continue lending at a similar rate to earlier in the year and a few of the smaller lenders have been increasing their lending. In addition we have seen a few new entrants to the market, with more expected over the next few months. Individually the new lenders won’t make much impact but added together they make a difference,” said Boulger.
He added: “As a result of many mainstream lenders’ tighter criteria we are transacting increasing amounts of business with private banks and other niche lenders, often at better rates than are available on the High Street, and we don’t expect their appetite to diminish.”
He added that lenders ongoing fears that defaults would rise have not been realised.
“Lenders expectations have been badly wrong on this for the last 4 quarters. In each quarterly forecast for the last year lenders expected defaults to increase and in each quarter they fell. Consequently one can take their forecast of a small increase in defaults in Q3 with a pinch of salt,” he said.
