Lenders say that the cost and availability of funding is weighing down on credit availability, the Bank of England’s Credit Conditions Survey for Q3 reveals.
The survey shows that lenders believe tight wholesale funding in particular, as well as pessimistic expectations for house prices, are constraining lending.
The Bank says that although credit availability is not expected to deteriorate overall in Q4, recent discussions with some of the major lenders have suggested that if difficult wholesale finding conditions continue, their ability to lend in the future could be affected.
Despite this, the Bank says that the overall amount of secured credit made available to households was reported to have increased slightly in Q3.
It says lenders reported a slight increase in risk appetite, with a pickup in credit availability to high LTV borrowers.
Demand for loans for house purchase was reported to have increased in Q3, while demand for prime lending increased for the first time since the end of 2009.
There was also a continued rise in demand for buy-to-let lending, but demand for remortgaging fell in Q3.
The survey says: “Lenders expected total demand for secured lending to be broadly unchanged over the next three months.”