The Bank of England Credit Conditions Survey revealed that lenders gave a score of 23.2% for the availability of mortgages in Q2, up from a reading of 9.2% in Q1.
The survey scores are weighted by lender market share, and a positive or negative reading indicates an improvement or decline in metrics, with larger differences indicating more significant changes.
When asked to predict the availability of secured credit to households for the next quarter, lenders gave a reading of 21.2%.
Lender responses suggested that a changing risk appetite was the main factor for the availability of credit, giving a higher score for this compared to factors such as expectations for house prices, wholesale funding conditions, market share objectives and a changing economic outlook.
When asked if lenders had become more willing to lend to people with less than 10% in housing equity, a score of 7.2% was given for the sentiment in Q2, a slight improvement on the score of 2.6% in Q1. Looking ahead to the next quarter, lenders suggested conditions could become even more favourable, with a score of 8.6%.
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Responses showed that there was a small rise in the number of loans approved in Q2, with expectations for this to increase further in Q3.
Lenders also reported a slight decline in the credit quality of new loans originated, scoring 0.7% in Q2, down from 2.3% in Q1. This was predicted to recover, however, according to a reading of 2.5% for Q3.
Decline in purchase demand, uplift in remortgages
Lenders expect overall demand for mortgages to drop off in Q3, as suggested by a reading of negative 19.8% for the appetite for prime lending. This was down from a score of 30.9% in Q2.
In contrast, lenders said remortgage activity was high in Q2, at a score of 30.4%, and was set to remain elevated in Q3 with a prediction reading of 21.4%.
Buy-to-let (BTL) mortgage activity was predicted to be steadier, with a prediction score of 1.2% in Q3. This was compared to a score of 23.9% for the demand seen for BTL lending in Q2.
Interest rate movements could stay relatively flat, lenders suggested, giving a score of 1.2% for lending spreads relative to the bank rate or appropriate swap rate over the next quarter. This was compared to a slight widening in overall spreads in Q2.
As for changes to fees, maximum loan-to-value (LTV) ratios and maximum loan-to-income (LTI) ratios, lender responses showed this had stayed stable in Q2 and was set to remain fairly stable in Q3. There was a slightly higher expectation for LTI limits to change in the next three months, with a prediction score of 3.6% compared to 1.8% for LTV limit changes.
