Mortgage availability is predicted to worsen during the third quarter of the year as lenders find it harder to raise funds, new research suggests.
Some 11.4% of banks said they expected to lend less during the coming three months, due to an anticipated tightening in the wholesale funding markets, according to the Bank of England’s credit conditions survey.
Lenders also expected caution about the economic outlook to constrain lending levels, while they do not plan to expand their market share, which had led to a small rise in mortgages during the second quarter.
Concerns about the state of the economy led to the availability of credit for businesses rising by less than anticipated up to June, although banks expect lending to firms to increase slightly.
But despite the rise in mortgage availability, demand among buyers weakened for the second consecutive quarter as the housing market remained subdued. Remortgages rose slightly.
Figures from Nationwide Building Society this week revealed Northern Ireland’s property market as the most sluggish in the UK, with house prices falling by 5.2% this year. Rises are not imminent.
UK-wide, increased competition led to a narrowing in the margins lenders charged on mortgages — a trend expected to continue. The proportion of a property’s value banks were prepared to advance also rose for the third consecutive quarter.
Lenders reported the number of people defaulting on mortgages fell during the second quarter, continuing the downward trend that began during the first half of 2009. The trend is expected to continue, but a deterioration in the economy could increase defaults. There was also a fall in the number of people defaulting on unsecured debt, which lenders blamed on tighter credit scoring.
The availability of unsecured credit remained broadly unchanged during the second quarter, although it is expected to increase slightly during the coming three months.
Banks relaxed lending criteria for credit card customers but are tightening it for other borrowers.