BoE: banks expect significant increase in mortgage supply, more business loans

LONDON Wed Jan 8, 2014 4:52am EST

The Bank of England building is seen in central London March 20, 2008. REUTERS/Toby Melville

The Bank of England building is seen in central London March 20, 2008.

Credit: Reuters/Toby Melville

LONDON (Reuters) - British lenders expect a significant increase in the availability of mortgages and a better supply of business loans in the first quarter of 2014, a Bank of England survey showed on Wednesday.

The central bank's quarterly Credit Conditions Survey said banks reported that demand for secured lending by households - essentially mortgages - rose at its fastest pace in the fourth quarter since the survey began in 2007.

"Lenders expected the availability of secured credit to significantly increase in 2014 Q1, including for those borrowers with a LTV (Loan to Value) ratio above 75 percent and 90 percent," the BoE said.

The government launched a mortgage guarantee scheme under its Help to Buy plan in October, helping home-buyers to put down a deposit of as little as 5 percent.

The impact of the latest phase of the Help to Buy program has so far been modest, leading to an extra 6,000 mortgage applications between October and December, according to previously released numbers.

That compares with overall mortgage approvals that are running at about 70,000 a month.

The BoE survey published on Wednesday found lenders expected spreads on mortgage rates to fall further but only slightly over the next three months.

House prices in December saw their first month-on-month fall since the start of 2013, lender Halifax said earlier on Wednesday.

The BoE said a rise in commercial property prices pushed up availability of credit significantly for the first time since the question was included in its surveys in 2008.

The BoE survey also showed that the availability of credit to the corporate sector increased significantly in the last three months of 2013, helped by the improving outlook for the economy as well as competition among banks and from capital markets.

"All these factors were expected to contribute significantly to availability in 2014 Q1," the Bank said.

The BoE has long highlighted the lack of credit for companies as a hindrance to Britain's economic recovery.

In November, the Bank and the government agreed to refocus their joint Funding for Lending Scheme away from mortgage lending and it will now only seek to encourage lending to businesses.

The BoE survey was conducted between Nov 11 and Dec 2.

(Reporting by William Schomberg and Costas Pitas)

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