The Bank of England’s Credit Conditions Survey showed that lenders increased the supply of mortgage lending to households in the third quarter of 2013, but do not expect the growth to continue at the same strong pace in the next few months.
There was a significant increase in the number of mortgages available for borrowers with loan-to-value (LTV) ratios above 75%, although lenders’ willingness to lend at LTV ratios above 90% was little changed.
The increase in mortgage supply over 75% LTV was attributed to lenders desire to increase their market share, rather than any increase in an appetite for riskier lending.
Consistent with that, credit scoring criteria, maximum LTV ratios and maximum loan to income ratios for mortgage lending did not change significantly between Q2 and Q3.
The ‘spread’ or ‘margin’ over Bank Base Rate or swap rates which lenders applied to mortgages fell overall in Q3 and is expected to fall further in Q4.
Demand for mortgages for buying homes increased significantly in Q3 and was expected to grow further in Q4, and lenders also reported a big rise in demand for remortgage deals.
Defaults on mortgages fell significantly in Q3 and are expected to fall further in Q4.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said:
“There has been a significant increase in availability of loans for those borrowing more than 75% loan-to-value but not much change in the 90%-plus bracket. The reason for this could be that lenders have been waiting for the mortgage guarantee element of Help to Buy – which launched yesterday – and will enable them to lend at higher LTVs.
“Lenders are keen to stress that they haven’t changed their risk appetite, suggesting that they are as stringent as ever on underwriting with no relaxation on credit scoring. This is admirable but lenders do want to increase their market share: many will have one eye on the year-end and where they want to be in terms of volume of lending done by the end of December. If they are set to undershoot their targets, now is the time where they need to offer more competitive products. This should be excellent news for borrowers.
“Brokers and agents are likely to be extremely busy in the final quarter of the year as demand shows no signs of abating.”
