Mortgage availability increases 'slightly'

Thursday, 02 July 2009 11:56

The Bank of England today reported the availability of mortgages increased "slightly" in the second quarter of 2009.

Over the coming three months mortgage lending is expected to increase further.

This is the first rise in mortgage availability since 2007.

For borrowers looking for mortgages over 75 per cent loan-to-value (LTV), lenders stopped reducing the number of mortgages available and held firm.

This is little consolation for borrowers, but does perhaps mark a start of the turning of the market.

The availability of unsecured credit such as credit cards and personal loans was reduced, the central bank found.

As the cold winds of the recession bite, the Bank found default rates on mortgages and loans rose and are expected to increase further - creating further losses for banks.

Howard Archer, chief UK economist at IHS Global Insight, said: "The Bank of England survey encouragingly indicates that credit conditions may finally be beginning to improve.

While latest hard data still indicates muted lending to corporates and households, the Bank of England survey boosts hopes that the various policy measures undertaken by both the central bank and the government to boost bank lending - including quantitative easing - are starting to feed through to have a beneficial impact."

He added the hope was that with the crunch on credit easing, the strait jacket on the economy may also be easing.

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