A new squeeze on mortgages could be on its way, a Bank of England report has warned. Since the end of the recession, the number of mortgages available to customers has risen, but the trend looks set to reverse as wholesale funding is forecast to tighten.
The bank?s Credit Conditions survey also saw some good news though, with a fall in the rate of loan defaults for both mortgage holders and businesses. The survey also found that demand for home loans was slightly down in the last three months, despite a rise in availability.
Dougald Middleton, head of capital and debt advisory at Ernst & Young, told BBC News: “While the survey shows that costs of borrowing have eased over the last quarter, we think credit conditions have turned over the last three or four weeks.”
Chief European economist at Capital Economics, Jonathan Loynes thought the survey struck a “fairly downbeat tone”, with mortgage availability expected to decline in the next three months.
A separate survey from Moneyfacts showed that homebuyers with a large deposit have benefited from the increase in mortgage availability. Those with a 40 per cent deposit have seen a 10.6 per cent increase in mortgage deals in the last month, whereas those with a 15 per cent deposit have seen a 2.8 per cent decrease in the number of deals.
Michelle Slade of Moneyfacts said: “Rates continue to decline as lenders try and tempt borrowers off record low standard variable rates and on to new deals, so much so that the average two year fixed mortgage now stand at its lowest level in seven years.”
Due to the low cost of standard variable rate (SVR) mortgages many people have not remortgaged in the last 18 months. However, the Bank of England report showed that the number of people looking to remortgage had risen for the first time since the back end of 2008.
