False gloom? Credit Conditions Survey

The latest Bank of England credit conditions survey has just been released, giving a look at lenders’ hopes and fears for next three months.

There’s a little bit of good news to begin with – in the 3 months to the end of May,  availability held up consistently with the start of the year. This is encouraging because in February lenders were predicting it would fall back.

But it’s less cheery looking ahead. While availability is expected to remain the same overall, those above 75% Loan to Value will see their access to mortgages drop substantially. This chart puts it into context – the magenta diamond shows overall availability for the next 3 months – flat 0% level of growth. But the green diamond shows high LTV (above 75%) dropping at a rate we haven’t seen since the height of the credit crunch.

Source : Bank of England

As if that weren’t enough, lenders are also expecting rates to go up as well. Having already seen increases last quarter, the expectation is for something fairly similar to happen again.

The blame for all this is squarely put on a) declining economic outlook; b) tighter wholesale funding; and c) concerns about house prices. Clearly this last reason is a tad circular since a key element in knocking house prices will be mortgage availability. Otherwise it’s largely our friends in Europe causing the concerns again. I know – but this is an opinion piece, not breaking news!

Still, that does give us a bit of hope. This information was compiled in the last two weeks of May – before the Mansion House speeches announcing the new funding lines aimed precisely at increasing availability and reducing costs.

So it would have been ever so slightly helpful if the Bank had followed up to find out what difference lenders think that will make. My guess is it’d be along the lines of “not much, until we see the details”, and as we’ve already noted, odds are that it would have little impact until the final quarter at best.

As it stands, then, all the available evidence points to a pretty gloomy outlook for the summer months. Let’s hope it’s already out of date.

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