Lenders reduce mortgage and credit availability

The Bank of England undertakes a quarterly Credit Conditions Survey across bank and non-bank lenders. This covers secured (mortgages) and unsecured lending to households and small businesses as well as lending to non-financial corporations and non-bank financial firms.

Lenders are asked various questions about credit conditions, considering the previous three months and the next three months.

The final Credit Conditions Survey for 2008 was undertaken between 24 Nov and 15 Dec.

The survey found that over the previous three months, lenders had reduced both the availability of secured credit, or mortgages and unsecured credit to households. This reduction in mortgage and credit availability is expected to continue over the next three months.

Lenders site a number of factors contributing to the reduction in credit availability, including concern about the economy and the housing market and also the cost and availability of funds.

Lenders also expect the demand for credit to buy a house or to take out a remortgage to fall over the next three months.

Perhaps not surprisingly the number of mortgage and loan defaults, and the amount involved when these loans are in default, rose over the last three months. Loan defaults are expected to continue to rise over the next three months.