Lenders say they have tightened their credit scoring criteria in the second quarter and expect to tighten it further over the next quarter, according to the Bank of England’s latest credit conditions survey.
They believe the changes reflect a more cautious approach to assessing the ability of borrowers to cope with higher loan-to-value mortgages and mortgage payments.
A net balance of lenders reported that the loan approval rate is expected to fall for the first time since early 2009 in the fourth quarter.
Lenders say default rates continued to fall, contrary to expectations, and are expected to fall in the fourth quarter. However, lenders believe the default rate will be influenced by the impact of fiscal tightening.
A net balance of lenders – 8.3 per cent – said there had been an increase in the amount of secured credit made available to households, despite some tightening of the wholesale markets.
Over the previous four quarters, the availability of lending at LTVs greater than 75 per cent increased. But lenders do not expect this to increase further in the next quarter.
Chartered surveyors e.surv says the average LTV offered by lenders has increased by 1 per cent to 58.9 per cent, up significantly on the 49.4 per cent low point in December 2008.