In monitoring trends and developments in credit conditions for Q4, lenders were asked about the past and future three months on secured and unsecured lending to households; and lending to non-financial corporations, small businesses, and to non-bank financial firms.
A significant fall in demand was reported both for prime lending and buy-to-let lending. But, demand for secured lending for house purchasing was expected to increase slightly in Q1. Similarly, demand for secured lending for remortgaging fell in Q4, but was expected to increase in Q1 2015.
Spreads on secured lending tightened significantly in Q4 and a further tightening was anticipated in Q1. Secured loan performance was again reported to have improved in Q4.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “This caught lenders out as they had expected mortgage demand to rise but they still expect a slight increase over the next three months, perhaps as buyers in the mainstream market take advantage of the reduction in stamp duty.
‘The spreads between the cost of borrowing to lenders and the rate charged to borrowers narrowed significantly as lenders competed with each other for business. As this continues into the first quarter of this year, lenders expect to make further rate reductions, making competitive mortgages even more attractive.”
Maximum loan-to-value (LTV) ratios were reported to be unchanged, but maximum loan-to-income (LTI) ratios fell significantly in Q4. LTI ratios were expected to fall slightly further in Q1 and some lenders said that they had introduced policies which restricted lending at high LTI ratios for specific types of borrowing.
The overall availability of other secured credit, which includes equity release, to households increased in Q4, but lenders reported less willingness to lend at LTV ratios above 90%, and maximum LTI ratios fell significantly.
The availability of unsecured household credit increased again in 2014 Q4. Demand increased significantly for both credit card lending and other unsecured lending products such as personal loans.
These net percentage balances were both at their highest since the Credit Conditions Survey began in 2007 Q2.
