Net lending edges up in May, says BoE
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The flow of net mortgage lending by all UK-resident mortgage lenders increased in May, but gross mortgage approvals declined slightly in June according to data from the major UK lenders.
In the Bank of England’s 2010 Q2 Credit Conditions Survey, a small balance of lenders reported an increase in the amount of new secured credit made available to households, though a decline in the availability of credit was expected in the next three months.
The flow of net sterling mortgage lending by all UK-resident mortgage lenders increased in May to £1.2bn, and the annual rate of growth in the stock of lending edged up to 1.1%
Some major UK lenders reported that the recent increase in funding spreads was starting to apply upwards pressure on loan pricing, though had yet to affect pricing materially.
Consistent with that, the Bank’s measure of the overall effective interest rate on new mortgages was broadly unchanged in May.
On the supply side, a small balance of lenders reported an increase in the amount of new secured credit made available to households, reflecting an increase in credit availability to borrowers with high LTV ratios.
In the next three months, respondents expected the availability of secured credit to decrease, partly reflecting lenders’ expectations that wholesale funding market conditions might tighten in that period.
In some contrast, the major UK lenders reported that remortgaging activity had not picked up recently and was expected to remain subdued in coming months. Looking forward, the major UK lenders expected demand for secured lending to be flat over the rest of the year, partly reflecting weak confidence among potential homebuyers.
Contacts of the Bank’s network of Agents reported that despite a slight increase in the availability of credit, demand continued to be constrained by the restrictions on mortgage finance, particularly for first-time buyers. In June, the Royal Institution of Chartered Surveyors’ new buyer enquiries index was slightly negative, indicating a decline in demand for house purchase.
In contrast, the new instructions balance rose and continued to indicate an increase in the number of houses being put up for sale.
In recent discussions, the major UK lenders also reported that the supply of housing for sale had increased, partly in response to the suspension of Home Information Packs in May 2010. Looking forward, most major UK lenders expected house prices and housing transactions, and so gross lending for house purchase, to be broadly flat over the second half of 2010.
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