Mixed outlook for mortgage lending

Permalink: Mixed outlook for mortgage lending
by Gill Montia

UK mortgage lending was broadly unchanged in the three months to mid-December, compared with the previous quarter, the Bank of England reports.

Lenders had been expecting a slight increase and blamed tighter wholesale funding conditions and fears over house price falls for the flat performance.

Looking ahead Britain’s banks and building societies are predicting that home loans will be more readily available in early 2012.

Product innovation could help drive demand from first-time buyers and those with small amounts of equity in the homes, as lenders launch higher loan-to-value deals that are backed by collateral from house builders.

At the same time, any pickup in credit availability could be offset by tighter credit scoring criteria between now and the Spring.

Some lenders have already revised down expectations for households’ disposable incomes and hence the affordability of taking out new mortgages.

More positively, the default rate on mortgages fell in the final three months of 2011 and is expected to fall further in early 2012.

In addition, demand for buy-to-let mortgages has increased for the sixth consecutive quarter, according to Bank of England data.