Mortgage lenders in the UK have reported an increase in the availability of credit to borrowers with a smaller deposit in the first quarter of 2013. The Bank of England's credit conditions survey has found that there had been a marked increase in the number of loans for borrowers with less than a 25% deposit, as well as a general increase in the availability of mortgages for all households.
More high loan-to-value mortgages now available - and they're getting cheaper
The Bank of England's latest credit conditions survey says the "rise in credit availability was reported to be a little more marked for borrowers with loan-to-value (LTV) ratios above 75%." The survey asks lenders for their views on the availability of mortgage finance. When asked how this had changed in the first three months of 2013, lenders reported a positive net balance of 8.9 for borrowers with a deposit larger than 25% and a positive net balance of 18.7 for those with a deposit smaller than 25%. A positive balance indicates increased availability.
In addition, the survey found that the maximum loan-to-value and loan-to-income ratios had increased "slightly'".
Money Marketing reports that "lenders cited ‘market share objectives' as the main driver of increased credit availability in Q1, along with an increased appetite for risk and improved wholesale funding conditions."
"This is great news for borrowers with a smaller deposit as it shows that there is more mortgage finance available at higher loan-to-values," says Keith Osborne, editor of whathouse.co.uk. "The survey also found that lenders expect the situation to continue to improve which should help buyers with smaller deposits throughout 2013."
The Bank of England survey says: "The availability of secured credit was expected to increase further in 2013 Q2 across all LTV ratios, again driven by market share objectives."
As well as a greater availability of mortgage finance, the cost of borrowing is also falling according to the Bank of England survey. Lenders reported that ‘spreads' on secured loans - the difference between the rate charged and the base rate or cost of borrowing to the lender - tightened "significantly" in the first three months of 2013. They attribute this to cheaper funding costs and increased competition among lenders.
Money Marketing adds that "spreads were expected to tighten further - meaning mortgage rates will fall."
Osborne adds: "More mortgages for buyers with small deposits and falling rates can only be great news for house buyers in 2013."
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