Green shoots

Spring might not be in the air but it seems the banks are feeling frisky if last week’s credit conditions survey is anything to go by.

There was better mortgage availability in the first quarter of 2013, we’re told – though I’m never entirely sure whether “available” means there were more of them around, or whether they were easier to get: a crucial distinction as any failed lothario will tell you.

In fact it seems to be a bit of both, in that more loans were available, especially above 75% loan-to-value which is of course the most squeezed area. And, the Bank tells us, the average credit quality has fallen. Now before those of an alarmist bent start getting out the reckless banners, let’s remember that a) loan-to-value is one of the credit quality measures – so by definition higher LTVs mean “lower “ quality, and b) this is the bar slowly creeping down from an extraordinarily high level. So don’t panic.

And the extra good news is there’s more of it to come. Lenders forecast the 2nd quarter will see yet more funds available, with terms loosening further.

Interestingly though, in the last 3 months credit scoring levels didn’t change, and the proportion of applications getting approved actually fell. But in Q2 they suggest (and unless they’re lying, it should be a promise) credit scoring looks set to ease and the approval rate should increase.

So the message seems to be, if you’re one of the people who was declined last quarter, give it another couple of months and try again.

Mortgage ratesalso fell in the first quarter, as we’ve talked about at length, and are forecast to come down more in the months to come; although to be honest, I’m not sure how much more the leading rates can fall. Every week or so we see a press release trumpeting yet another lowest ever rate, only to find they’ve unaccountably failed to mention the highest-ever fees to go with it.

The most encouraging news though, comes from the rationale behind the improvements. Inevitably Funding for Lending is cited as a major factor (as you’d hope, since that is the point of it) but better than that, the “main contributor” to the improved market was lenders chasing market share.

They’re having at scrap at last – trying to outbid each other for your business. And since the overall value of the leading rates seems fairly stable, I’d guess it’s likely to be the higher loan to values that will see the most benefit.

We’ve already seen great improvements for those with a 15% deposit, who’d have been looking at something like 4% for a 2yr fixed rate mortgage 6 months ago, and could now potentially get below 3.5% - a continuation of that trend (and dare we think something similar for 90% loans?) would be very good news indeed.


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