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BOE Says Lenders See Significant Increase in Mortgage Demand

The Bank of England said mortgage demand will rise significantly in the second quarter, providing further evidence of a boom in the U.K. housing market.

Lenders reported an increase in the availability of home loans in the first quarter, with further gains expected as official incentive programs increase the availability of higher loan-to-value products, the BOE said in its quarterly Credit Conditions Survey, published in London today.

A strengthening economy, easing loan conditions and government aid programs are helping to fuel Britain’s property market. Nationwide Building Society reported yesterday that house prices rose for a 15th month in March, and the BOE has said it is monitoring the pace of activity for any risks to financial stability.

“The expansion in overall availability was reported to be driven by an improvement in the economic outlook and increased appetite for risk on the part of lenders,” the central bank said in the survey. “Lenders expect the availability of secured credit to increase further in 2Q, driven primarily by a desired expansion in market share.”

The BOE said there had been a significant increase in mortgages available above 75 percent of the value of the home purchased. The willingness of banks to lend above 90 percent also rose significantly, with the balance climbing to the highest since the question was first asked in the second quarter of last year.

“Consistent with this, maximum LTV ratios offered on loans increased significantly and maximum loan-to-income ratios increased slightly,” the BOE said. “Many lenders attributed the increased availability at high LTV ratios to participation in the government’s Help to Buy scheme.”

Mortgage Spreads

Spreads on mortgage lending are expected to narrow further in the second quarter, the BOE said. Demand for credit card loans fell significantly in the first quarter, although other unsecured products, such as personal loans, increased, it said. Lenders reported a decline in default rates on mortgage debt, with a further drop seen in the second quarter.

On corporate loans, the BOE said availability and demand rose and further increases are expected in the second quarter.

“Lenders cited a number of factors including market share objectives and an improvement in the economic outlook,” the BOE said.

The survey was conducted between Feb. 7 and March 3, the BOE said.

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