Lenders report rise in availability of secured credit – BoE

Lenders have reported that the availability of secured credit to households increased in the three months to the end of February, according to the latest Bank of England (BoE) Credit Conditions Survey.

Industry figures are also expecting the availability of secured credit to increase over the next three months, to the end of May.

The BoE’s survey asked lenders to report changes in the three months to the of end of February 2021 (Q1), relative to the period between September and November 2020 (Q4), and expected changes in the three months to end of May (Q2), relative to the period between December and February.

The findings also revealed that lenders had reported demand for secured lending for both house purchase and remortgaging decreased in Q1, but was expected to increase in Q2.

However in terms of loan pricing, industry figures indicated that that overall spreads on secured lending to households – relative to the BoE’s base rate or the appropriate swap rate – narrowed in Q1, and were expected to narrow further in Q2.

Commenting on the survey results, Coreco managing director, Andrew Montlake, said: “Lenders clearly believed demand for mortgages decreased in the three months to the end of February because a lot of people felt they had missed out on the stamp duty holiday deadline. But in March, after the Budget, everyone then piled in again.
 
“From our point of view, demand in 2021 has been exceptionally high not so much due to the stamp duty deadline but because people want to move home for extra office space and a garden due to the pandemic.
 
“Lifestyle reasons are now far more of a driver of property market activity than saving a few thousand pounds in stamp duty. Where I do agree with lenders is that demand will increase in the next few months as the economy reopens, lockdown eases and sentiment on the whole improves.”

Director of the Mansfield-based independent mortgage broker Shaw Financial Services, Lewis Shaw, added: “More lenders have returned to higher LTV loans in the first quarter, and we have also seen the pricing of fixed rates begin to improve, again most notably at higher LTVs where lender competition is growing.

“However we are not back to pre-pandemic rates and I suspect we won’t be for quite a while, if at all.”

Head of Intermediaries at the mortgage switching platform Dashly.com, Iain Swatton, suggested that lending criteria is still an issue, with many lenders still “extremely cautious”, especially when it comes to borrowers on furloughed income or the self-employed.

“Hopefully, the second quarter will retain its momentum as the demand for property remains high, with more and more buyers coming out of hibernation to find their next property,” Swatton said. “The one issue, as ever, is a lack of supply.

“Demand for remortgages remains strong with rates remaining at historically low levels. If the purchase market does tighten, brokers will inevitably focus their attention on their back-books, if they are not doing so already.”

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