The Bank of England’s Credit Conditions survey showed that lenders gave a response score of 43.3 per cent* when asked about the rate of defaults in Q3, which was higher than the score of 30.9 per cent in Q2.
Looking ahead, lenders predicted a rise in default rates as indicated by a score of 47.4 per cent in the next three months. This was a worse sentiment than in Q2 when 41.2 per cent of lenders forecast an increase in defaults in the following quarter.
Lenders also predict losses on defaults to worsen in the Q4 with a response score of 24.2 per cent.
Mortgage availability and demand
Lenders said the availability of secured credit to households fell in the three months to August and was expected to decrease slightly in Q4.
However, lenders said they would be more willing to lend to people with less than 10 per cent equity going forward as they gave a score of 11.4 per cent for Q4. This was up from a score of -6.9 per cent when asked about how willing they were to lend to this cohort during Q3.
This was also reflected in the availability of mortgages for borrowers with high loan to value (LTV) ratios of 75 per cent and above. Lenders said in Q3, the availability was in negative territory as indicated by a response score of -29.7 per cent.
This is set to improve in Q4, with lenders giving a score of 15.8 per cent for the next three months.
The demand for mortgages was said to be suppressed for both purchase and remortgage in Q3.
For Q3, lenders gave a response score of -54.9 per cent for mortgage demand, which was significantly down on the score of 52.7 per cent given in Q2.
Borrower demand is expected to stay in the negative over the next three months, according to the lender response score of -28.4 per cent.
The demand for prime mortgage lending declined in Q3, as lenders gave a score of -54 per cent, compared to 53.6 per cent in Q2. Demand for buy-to-let lending also slipped, with a score of 5.3 per cent, which was down from 33.3 per cent in the previous quarter.
Lenders said the demand for remortgage was down and returned a response score of -22.8 per cent for Q3. This was down on the previous quarter when the response score was 51.3 per cent.
* The survey’s results are calculated with net percentage balances which vary between scores of negative 100 and 100 depending on how many lenders report positive or negative changes and is weighted by their market share.
