There may be trouble ahead…Mortgage lending to get tougher

A Bank of England survey suggests it may be more difficult for prospective buyers to get a mortgage later this year.

In the BoE’s latest quarterly Credit Conditions Survey, lenders reported that credit to households - including mortgages - increased slightly in the three months to the end of August. Much of this was driven by greater demand for mortgages as a result of the stamp duty holiday. 

However, those same lenders have told the Bank that while demand for both house purchase credit and remortgaging would probably increase in the next quarter, it would more difficult for borrowers to take out a mortgage.

This is because increasingly-cautious lenders are considering tightening lending criteria - and that's despite a call from Prime Minister Boris Johnson just a week ago for more relaxed mortgage conditions for first time buyers.

In response to the warning shots from lenders, Joshua Elash, director of property lender MT Finance, says: “As the economy deteriorates, and unemployment numbers continue to creep up, adverse credit could seriously impact the availability of credit to the average household.”

And Mark Harris, chief executive of mortgage broker SPF Private Clients, adds: “Borrowers who have found it harder to get a mortgage will not be surprised to hear that lenders tightened criteria in the third quarter and expect to tighten further in the run-up to the end of the year. Concerns about the impact of the pandemic on earnings and what will happen to property prices, particularly for those borrowing at high loan-to-values, is behind this growing caution.”

According to Jeremy Leaf, the London estate agent who is also a former residential faculty chair at the RICS, the figures demonstrate the strength of increase for house purchase mortgages in the third quarter after lockdown ended and the SDLT holiday began. 

“The beginning of the fourth quarter has coincided with a pause by some in house purchasing decisions although the underlying reasons to move for many have not diminished. Looking forward, we anticipate a reduction in numbers but no major change in pricing or transaction levels” Leaf says.

The Bank of England carries out the credit conditions survey each quarter, but individual lenders’ views are not necessary Bank policy. The latest survey was carried out between September 1 and September 18.