Mortgage lending - Banks making it harder to access.

Mortgage lending by Banks has seen a cautious approach in the third quarter of this year. Risk taking by the Banks, when it comes to mortgage lending, may be even less over the next three months.

Demand from borrowers, however, has not diminished. Demand for remortgaging increased “significantly,” according to the survey of credit conditions produced by the Bank of England.

The rise in demand for remortgages is thought to have been caused by the increased rate rise last August.  Homeowners may be anticipating more rises in the base rate and are looking to lock in lower rates on fixed mortgages before any more rate rises happen.

Mortgage lending – Bank of England survey.

The survey also shows that when it comes to unsecured loans the situation is broadly similar to mortgage lending.  While customers continue to demand more credit, the Banks are reducing the availability to borrow more.  The Bank of England said the large increase in demand for unsecured loans was caused just by credit cards.

The Bank of England’s outlook for the UK economy is that it will get worse over the next 3 months.  This could explain why lenders have become more wary of approval for loans and mortgages.

Lending to businesses is less cautious.

When it comes to businesses, Banks have been less cautious.  Corporate credit supply remained flat overall but increased for small businesses.

However, banks expect to lend slightly less to firms in the fourth quarter of this year.

Default rates for both secured and unsecured lending to households fell between July and September.  Despite this the banks remain cautious.  The default rates are not expected to rise for the last quarter of the year.

However, for businesses the rate of defaults increased in the third quarter. The amount lost in defaults was unchanged and is not expected to change in the fourth quarter of the year.

Government report on household finances.

At the same time as the bank of England released their lending data, the Treasury Select Committee has published the Government response to its report on Household finances.

MPs had highlighted the issue of households in persistent debt, debt collection practices of some lenders and local government, and pensions’ tax relief.

The Government said that it monitors the state of households “closely” and said it had taken steps to limit the “unsustainable build-up of mortgage debt”.

This included the borrowing limits imposed on banks in 2014 by regulator, the Financial Conduct Authority.

These are intended to safeguard against offering mortgages to highly-indebted borrowers.

Nicky Morgan MP, chairman of the Treasury Select Committee said:

“Whilst financial service regulators and guidance bodies have important roles to play, the Government should not pass the buck to them.”

There was no “increased sense of the urgency required” from the Treasury on the issues raised by the committee.

Mrs Morgan also noted reports suggesting the Chancellor was considering reforming pension tax relief. These have raised the possibility that the annual tax-free pension contributions could be cut from £40,000 to £30,000. MPs would keep a “close watch” for announcements on the issue in the Budget, Mrs Morgan said.

Houses up for sale near to record low in September.

At the same time a survey of the property market by RICS also found that house prices have stayed static nationally.

They reported that the number of properties up for sale with estate agents was near a record low in September. This could be signalling that the housing market is slowing further as people are less keen to put their homes up for sale.

Estate agents expect fewer houses to be sold in the next twelve months. Interest from new buyers fell in September. This is the second consecutive month of drops.

It may be that as mortgage lending becomes less available the ability to purchase a home becomes less realistic for many. Without access to mortgages buyers will be fewer.

In September, data released from the ONS, Office of National Statistics, showed the property markets lowest annual growth rate since September 2009. 

RICS chief economist, said:

“There are a number of themes running through the comments of respondents this month but uncertainty relating to Brexit negotiations is at the very top of the list followed by references to the confidential remarks made by the Bank of England Governor to the cabinet.”

“All of this is not surprisingly taking its toll on the sales market with the key activity indicator in the survey flat or slightly negative in all parts of the country apart from Northern Ireland and Wales.

“There is no silver bullet that will immediately resolve this problem but encouraging new entrants to deliver affordable homes is certainly part of the answer.”