Lenders optimistic on higher loan-to-value ratios
In its latest Credit Conditions Survey, the Bank of England reports that the availability of mortgages with loan-to-value (LTV) ratios above 75% remained broadly unchanged during the three months to mid-June.
However, improvements in the cost and availability of funds meant that a small majority of lenders reported an increase in the availability of secured credit to households, the first positive change since the third quarter of 2007.
Lenders are expecting the trend to continue and to be accompanied by an easing of credit criteria that will improve access to high LTV mortgages.
According to the Bank, concerns about the economic outlook and falling house prices continued to have a negative effect on credit availability during the period of the survey but the impact was less than previously.
Responding to the report, Council of Mortgage Lenders’ economist, Paul Samter, acknowledges the expectation of a “modest” improvement to the availability of mortgages at higher LTV and loan-to-income ratios.
However, he points that some banks have been obliged to increase lending in return for government support and explains: “There has been a significant loss of capacity across other parts of the industry, which is unlikely to return in the short term.”
Mr Samter concludes: “While there are some encouraging signs, a rapid return to pre-credit crunch lending volumes and products remains extremely unlikely.”
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