The availability of secured credit to households was reported to have increased significantly in the three months to September 2012, according to the Bank of England’s latest Credit Conditions survey.
A further significant increase was expected over the next three months, with the Funding for Lending Scheme cited as an important contributing factor.
Lenders reported that the availability of unsecured credit to households had remained unchanged in 2012 Q3, but was expected to increase slightly in 2012 Q4.
The overall availability of credit to the corporate sector was reported to have remained unchanged for small, medium and large companies in 2012 Q3, and was expected to remain unchanged for firms of all sizes in the next three months.
Lenders reported that demand for prime lending for house purchase had increased slightly in 2012 Q3, while demand for buy-to-let lending had fallen slightly. In the coming quarter, lenders expected overall demand for secured lending for house purchase to increase slightly further.
Demand for overall unsecured lending was reported to have remained unchanged over the past three months. Lenders expected demand to increase slightly in 2012 Q4.
Lenders reported that demand for credit from small and large companies had fallen in the three months to beginning-September 2012, although demand from medium-sized firms was unchanged. Demand was expected to increase slightly from medium-sized firms in Q4, but demand from large and small firms was expected to remain unchanged.
Lenders reported that the default rate on secured loans to households fell slightly in the three months to beginning-September, but losses given default on secured lending were broadly unchanged. Both defaults and losses given default on secured lending were expected to remain unchanged in Q4.
Default rates and losses given default on total unsecured lending remained unchanged in 2012 Q3, and were expected to remain unchanged in Q4. Within total unsecured lending, however, the performance of other unsecured lending had improved: default rates and losses given default fell, and losses given default were expected to fall further next quarter.
Lenders reported that default rates on loans to small and large firms rose during Q3, and were expected to rise slightly further in Q4. Default rates for medium-sized firms were also expected to rise. Losses given default on loans to large businesses increased in Q3, and were expected to increase for large and medium-sized firms in Q4.
T, the trade association for UK lenders involved in the generation of mortgage business through professional financial intermediaries, comments on today’s Bank of England’s Credit Conditions Survey.
Peter Williams, executive director of the Intermediary Mortgage Lenders Association (IMLA), said: “The outlook for the rest of the year looks positive, and over the next three months we are expecting to see a rise in the number of competitive mortgage products being launched by lenders.
“The Funding for Lending scheme is enabling lenders to reduce the margins on top of their borrowing costs and this, coupled with lenders’ market share objectives and the improvement in credit conditions in recent months, has seen availability increase and average rates moving down.
“While the latest Credit Conditions Survey suggests lenders will spread this increase in secured credit across LTV ratios, it is important the focus is on the higher end of the scale with products aimed at first-time buyers and second steppers. This is where the market needs most support and without greater access here it will act as a drag on the rest of the market.”
