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BoE: Lending to be tighter in Q1 2012

Lenders expect to tighten credit scoring criteria for mortgages in Q1 2012, said the Bank of England.

Yuan Phoon, 5 January, 2012

Home buyers will find it even harder to obtain a mortgage in the coming months as a consequence said the Bank in its latest Credit Conditions Survey.

Lenders said they expect the proportion of total loan applications being approved to fall over the coming quarter with some lenders saying that they had revised down expectations for household's disposable incomes and hence the affordability of taking out new secured loans.

Overall demand for secured credit for house purchase was reported to have fallen over Q4 2011 although demand for Buy-to-let mortgages increased for the sixth consecutive quarter.

Lenders said that demand for prime lending had been constrained by the inability of many prospective house buyers to put down a sufficiently large deposit as well as increased economic uncertainty following recent tensions in the euro area.

Demand for both prime and buy-to-let lending is expected to fall slightly in coming months.

The Bank said: "Although lenders expected a small increase in overall credit availability in the coming three months, factors such as the economic outlook and tighter wholesale funding conditions were expected to impact negatively on credit availability.

"Lenders commented that developments in the euro area and their impact on banks' funding conditions would be a key determinant of credit availability over the coming quarter."

Banks and building societies told the Bank that this stringency had put off many potential house buyers from applying for mortgages.

The lenders said any increase in lending in the next few months was likely to be concentrated on those borrowers who could afford to put down a large deposit.

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Mike wrote:

The recession will not recede if the BOE does not make borrowing easier. I don't mean for lending to be as stupid as lenders made it at the top of the 'south sea property boom' but normal, sensible lending i.e. 3-4 x salary & based on affordability. If wages were to rise at say 2-3% per year then normal property rises of 8-12% would be sustainable and confidence would return in all areas of the financial world. You don't have to be a rocket scientist to work this out and whilst the powers that be continually discourage positive thinking, we will remain in this mess.

Thursday, January 05, 2012 9:16:26 PM GMT

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