Mortgage availability at 5-year high

Robyn Hall

September 26, 2012

However, applications for these home loans were largely restricted to those who could offer a hefty deposit.

Peter Williams, executive director of IMLA, said: “The outlook for the rest of the year looks positive, and over the next three months we are expecting to see a rise in the number of competitive mortgage products being launched by lenders.

“The Funding for Lending scheme is enabling lenders to reduce the margins on top of their borrowing costs and this, coupled with lenders’ market share objectives and the improvement in credit conditions in recent months, has seen availability increase and average rates moving down.

“While the latest Credit Conditions Survey suggests lenders will spread this increase in secured credit across LTV ratios, it is important the focus is on the higher end of the scale with products aimed at first-time buyers and second steppers. This is where the market needs most support and without greater access here it will act as a drag on the rest of the market.”

And David Brown, commercial director of LSL Property Services, added: “While lending levels are still far from healthy, it’s encouraging that lenders seem to have the appetite to improve mortgage availability in the next quarter, with the Funding For Lending scheme likely to be at the heart of any progress.

“Recently, there have been signs of a growing number of deals at higher LTVs, but in reality it’s still wealthier borrowers and those with spotless credit histories that are being favoured by banks and building societies. To give first-time buyer activity a real boost, and ease the strain on the private rented sector, higher LTV lending needs to be extended to a wider pool of potential borrowers. Let’s hope the FLS delivers this.”

Brian Murphy, head of lending at Mortgage Advice Bureau, said: “The easing of the wholesale funding markets along with the Bank of England’s Funding for Lending scheme has allowed lenders to realise their market share objectives, and there’s been a noticeable increase in mortgage availability in the last quarter.

“The Credit Conditions Survey suggests the availability of secured credit will increase significantly for the rest of the year, but we need lenders to focus on the bottom end of the market. Lenders say they’ve seen an increase in demand for house purchase, but if the market is to grow it needs new borrowers and remortgagors coming through at high LTV levels.”

But the Bank’s Survey also showed that SMEs are still finding it tough to obtain credit – despite attempts by the government to boost lending to small businesses.

Damian Hales, partner at Deloitte, said: “The figures also indicate that demand for lending from small businesses is stalling as small and medium enterprises (SMEs) continue to delay investment decisions and require less credit from the banks. It appears that for SMEs it is economic uncertainty, rather than the availability of bank lending, which is the major factor contributing to the UK’s stalling economic recovery.”

And Danny Waters, CEO of Enterprise Finance, added: “Company loans can be secured but not by the companies that need them most, namely the start-ups and SMEs that drive the economy.

“Small firms know that securing credit is next to impossible and so are not even bothering to pick up the phone or fill in the forms.

“The lack of supply and often punitive criteria in the unsecured and corporate loans sector has resulted in a sizeable increase in the number of secured, or ‘second charge’ loans being taken out.

“Demand for secured loans has gone through the roof in recent months, with both individuals and company directors using them as a way to raise funds at affordable rates.

“Activity within buy-to-let may have come off the boil slightly relative to the highs of a year ago but it’s still popular and is likely to remain that way given the still stringent criteria of lenders. It remains a market with long-term potential.

“The way people borrow, and where they borrow from, has evolved massively in recent years.”

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