BoE: Lending to be tighter in Q1 2012

Yuan Phoon

January 5, 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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