BOE Says Help to Buy Fueling Pickup in Mortgage Availability

The Bank of England said mortgage availability increased in the fourth quarter and will continue to rise as the government’s plan to aid first-time buyers improves access to higher loan-to-value products.

Lenders see a “significant increase in availability” this quarter, according to the BOE’s quarterly Credit Conditions Survey. A measure of demand for home loans rose in the fourth quarter to the highest since the survey started in 2007.

The government’s Help to Buy program is boosting availability of home loans with ratios above 75 percent and also improved willingness to lend above 90 percent, the bank said. The BOE has taken steps to cool the property market after a pickup in house prices raised concern among officials that an asset bubble was forming.

“Many lenders attributed the increased availability at the highest LTV ratios to participation in the government’s Help to Buy Scheme, while some others attributed it to increased competition associated with the scheme,” the BOE said. “Consistent with a move into higher LTV lending, lenders expected the average credit quality of new lending to fall over the next quarter.”

Lenders also reported in the survey that spreads on mortgages “narrowed significantly” for a fifth quarter in the three months through December, and there may be a “slight further narrowing” this quarter.

The pound stayed higher against the dollar after the data were published and was trading at $1.6423 at 9:33 a.m. London time, up 0.1 percent from yesterday.

House Prices

Mortgage lender Halifax said today it expects house prices to continue to rise in 2014 as the economic recovery strengthens. While prices dropped 0.6 percent in December from the previous month, they were up 7.5 percent in the fourth quarter from a year earlier.

“Mounting signs that the economic recovery is becoming firmly established, together with a predicted decline in unemployment, should further boost consumer confidence,” said Martin Ellis, a housing economist at Halifax. “This will increase the likelihood that more people will consider buying a property in 2014, therefore supporting housing demand.”

On corporate loans, the BOE said availability rose for both small and large companies. Demand from small businesses remained flat in the final three months of 2013, and demand may pick up for firms of all sizes in the current quarter.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE