The availability of secured credit to households was reported to have increased slightly in the three months to mid-December. The main factor that lenders cited as having contributed to the slight increase in credit availability was their expectations for house prices. Lenders also expect secured credit availability to increase in 2016 Q1.
Lenders reported that demand for secured lending for house purchase increased slightly in 2015 Q4, and was expected to increase in 2016 Q1. Within this, demand for buy-to-let lending increased significantly in Q4, while demand for prime lending fell slightly. Demand for remortgaging increased in Q4.
Lenders reported that the availability of unsecured credit to households also increased in Q4. Lenders attributed the increase to their changing appetite for risk and market share objectives. The increase in unsecured credit availability appeared particularly apparent in other unsecured lending, such as personal loans, where credit scoring criteria were reported to have loosened.
Overall spreads on secured lending to households — relative to Bank Rate or the appropriate swap rate — were again reported to have narrowed significantly in 2015 Q4, but were expected to widen slightly in Q1.
Default rates and losses given default on secured loans to households also fell significantly in 2015 Q4.
Brian Murphy, Head of Lending at Mortgage Advice Bureau, commented:
“For anyone looking to buy a home in the New Year, the prospects for borrowing are encouraging with mortgage lending to households expected to increase in the first quarter. This follows three months of steady growth in spite of Q4 usually experiencing a seasonal slowdown. Healthy appetite from consumers for mortgage borrowing is set to continue and accelerate into 2016.
“Buy-to-let and remortgage borrowers were especially active as the year came to a close, with lenders reporting a hike in demand. Landlords received another blow in the Autumn Statement, so we are likely to see a further rush in buy-to-let lending before the Stamp Duty changes come into play in April.
“Existing homeowners are becoming increasingly aware that the clock is ticking on rock-bottom mortgage rates. While any increase in interest rates would be gradual at first, many buyers will be looking to take advantage of the current market and lock into preferential rates.”
Peter Williams, Executive Director of IMLA, added:
"Despite rising house prices, prospective homeowners still have plenty of appetite to move with lenders reporting that mortgage demand for house purchases rose in the final quarter. These moderate gains look set to continue into early 2016, with low rates working in borrowers’ favour.
"A healthy supply of credit means would-be homeowners who meet affordability criteria can look forward to benefitting from competition between lenders. Affordability remains under pressure however, and it is important that policymakers work hard to ensure that the housing market can support people’s home owning aspirations.
“Lenders also reported that demand for buy-to-let lending increased significantly during the final quarter of 2015. In one respect, it shows the sector remains in good health, but it could also be an early warning sign that outside interventions risk causing a spike of activity and then a drop-off once new stamp duty rates for landlords and second homeowners take effect in April.
“The increase in BTL lending has been from a far lower base than in other sectors and there are legitimate fears that – by cutting landlords’ mortgage tax relief, increasing stamp duty and considering new macro-prudential controls on lending – there will be unintended consequences which damage the private rental sector and leave the housing market no better off.”
