A recent survey by the Bank of England has delivered what should be good news for home-buyers, suggesting that the availability of mortgage is expected to increase significantly over the next three months. The fragile state of the mortgage market has depressed the housing market for some years, but with some lenders now in a more upbeat mood, the situation should improve.
The Bank’s credit conditions survey of banks and other lenders reported:
“In the three months to beginning-September, lenders reported that the overall availability of secured credit [mortgages] to households had increased significantly, in contrast to the previous survey expectation of no change. This was the largest reported increase in availability since the survey began in 2007. ”
Funding for Lending Scheme contributing to mortgage availability
The government’s Funding for Lending Scheme (FLS) is seen as contributing towards this improvement in the availability of mortgage funding. FLS aims to encourage more lending to the UK economy than would otherwise have been the case, by providing funding to banks and building societies for an extended period, at below current elevated market rates.
At present five of the six largest mortgage providers have signed up for the scheme, as well as a number of small and medium-sized building societies. This shows that available funds will not just be channelled through the big high-street banks, but smaller lenders as well, which should ensure that a wide range of borrowers will benefit.
Banks lending at higher Loan to Value ratios
The Bank of England survey also reported that “The increase in availability of secured credit was reported to be concentrated on borrowers at higher loan to value (LTV) ratios (more than 75%), in part reflecting changes in lenders’ affordability criteria and increased availability for first-time buyers. ” In other words, buyers may be able to get mortgages for higher proportions of property values than before, providing they can afford the repayments.
Lenders are also targeting first-time buyers – both Lloyds TSB and Royal Bank of Scotland have said that they will use funds from the FLS scheme to offer increased lending to new homebuyers.
Commenting on the survey, the Council of Mortgage Lenders said “Pressures on public finances leave little room for manoeuvre for the authorities, but there are encouraging signs that the cumulative effects of a range of initiatives are having a positive effect currently on lender confidence and activity. ”
Any suggestion of an improvement in the housing market is welcome news, and the government will be hoping that its various initiatives will lead to sustained growth. Market analysts will be keeping a close eye on the figures for the last quarter of the year, to see if these confirm an upward trend in the number of mortgage offers being issued.
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