The quarterly survey of bank and building society lenders also found that the availability of secured credit to households increased slightly in the three months to mid-June, and lenders expected availability to increase further over the following three months.
Maximum loan to value ratios and loan to income ratios were reported to have been unchanged in Q2.
Overall spreads on secured lending to households — relative to Bank Rate or the appropriate swap rate — were reported to have narrowed significantly in Q2, and were expected to narrow again over the following three months.
Lenders also reported that default rates on secured loans to households fell in 2015 Q2, and were expected to fall again in Q3.
Mark Dyason, director of Edinburgh Mortgage Advice, commented:
"Mortgage rates have continued to fall throughout 2015 and, at lower loan-to-values, it's hard to imagine them going much lower. There is, as this report suggests, more room for rate improvements at higher loan-to-values.
"The MMR has placed considerably more emphasis on affordability and it's the background stress tests that are preventing some people, especially first time buyers, from getting a loan. Lenders are much more forensic in their underwriting and this has seen a rise in the number of rejections that would probably have passed pre-MMR. This has opened the doors to the ever-growing number of challenger banks and lenders that see the borrowers many lenders avoid as perfectly viable.
"Borrowers in the grey zone are being well served by banks such as Aldermore and lenders like Precise Mortgages where, depending on circumstances, it is possible to access lending at 85% to 90%.
"Lending is likely to pick up in the second half of 2015, as lenders look to catch up on their targets. Remortgages will drive a lot of this activity as a number of major lenders have large rate cessations. In other words, a lot of people will be finishing their existing rates and moving onto their SVR. If you can pass a lender's stress tests, you enter, in many cases, a rate nirvana."
