Secured credit availability on the rise, BoE survey reveals

Lenders have reported that the availability of secured credit to households increased in the three months to the end of August, findings from the Bank of England (BoE) have revealed.

According to the Bank’s latest Credit Conditions Survey, lenders are also expecting the availability of secured credit to increase further over the next three months, to the end of November.

In terms of demand for secured lending for house purchase, the BoE’s survey found that lenders have reported a decrease over the same period to the end of August, with demand expected to decrease further in Q4.

However, demand for secured lending for remortgaging increased in Q3, and was expected to increase further over the next quarter. Lenders also reported that overall demand for unsecured lending increased in Q3, across both credit cards and other unsecured lending, and was expected to increase further in Q4, the Bank revealed.

Furthermore, the survey revealed that lenders have reported overall spreads on secured lending to households – relative to Bank Rate or the appropriate swap rate – narrowed in Q3, and were expected to narrow further in Q4.

“The BoE figures show that banks have been more prepared to lend, particularly to people with less equity in their home,” Hargreaves Lansdown personal finance analyst, Sarah Coles, commented.

“This is largely because they’re more confident about the economic outlook, but also because they want to increase their market share, and they’re more prepared to take on risks. Their confidence in the future of house prices helps too.

“However, this golden age for cheap mortgages is unlikely to last, because the markets are pricing in an interest rate rise before Christmas, and another one in early 2022. And the banks won’t wait for any rate rise before they start pushing up the cost of mortgages. So far only the cost of 10-year fixed rates has started to rise, but we can expect shorter fixes to get more expensive as the banks become increasingly convinced that a rate rise is imminent.

“October was already set to be the busiest month of 2021 for remortgaging, according to CACI, because of the sheer number of fixed rates coming to an end, so it’s worth acting fast to snap up the best deals.”

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