Banks tipped to boost UK mortgages in early 2010

 

Banks and other lenders were making more mortgages available to their customers in the final quarter of the year and are expected to further boost their offerings in the new year, the Bank of England said today.

In its latest quarterly Credit Conditions Survey, which asks lenders about credit conditions over the past three months, the Bank reported that respondents had said that the situation had become better because of the improved economic outlook and higher house prices.

Respondents to the Bank's survey, who are also asked about their expectations for the next three months, said that conditions were more favourable, particularly for those customers looking to borrow more than 75 per cent of their property's value.

The rise in higher loan-to-value (LTV) mortgages is expected to continue into 2010, although at a slower pace, the Bank said.

The study will be welcomed by first-time buyers who have been hit hard by tightening credit conditions.

Figures from the Council of Mortgage Lenders show that the average person buying their first home with a mortgage has put down a record 25 per cent of the property's value during the past nine months.

The Bank recently reported that, in November, mortgage lending dropped by 10 per cent compared with the previous month, although that particular index focused on a narrower selection of lenders.

While demand for mortgages has continued to rise, demand for remortgages has dropped, as homeowners continue to benefit from low interest rates on their current deals.

Today's survey also showed that the availability of credit to businesses rose in the last quarter of the year, supported by increased competition from capital markets.

A further increase is expected in the first few months of next year.

Meanwhile, demand for credit from non-financial corporations was shown to have fallen in the fourth quarter, partly because of larger companies having access to alternative forms of finance.

However, corporate demand for finance is expected to increase in the first quarter of 2010.

Howard Archer, chief UK and European economist for IHS Global Insight, said: "[This] at least boosts hopes that quantitative easing and other policy measures undertaken by both the central bank and the Government to boost bank lending are increasingly feeding through to have a beneficial impact, in tandem with the modestly improved economic situation and outlook.

"Consequently, the survey raises hopes that credit conditions will increasingly become less of a constraint on economic activity over the coming months. This is critical to sustainable recovery prospects."

Source bbc.co.uk