Intermediary lenders remain optimistic about 2008, despite the current uncertainty in the market, reflecting the positive fundamentals of high employment and strong housing demand that underpins the market, according to the Intermediary Mortgages Lenders Association (IMLA).

Respondents to IMLA’s recent survey think remortgaging activity will remain buoyant, with over two thirds of members thinking volumes will increase slightly or remain the same. The survey showed lenders responding to changing market conditions with over 80% tightening criteria relating to loan-to-value ratios, and almost 60% tightening those relating to income and financial assessment.

Peter Williams, IMLA’s executive director, said: “Lenders have a realistic but optimistic perspective on the market, which will be supported by good levels of remortgaging activity and reaffirmation of prudent lending practices. They are noticeably more upbeat about their own firm’s volumes than they are about the market as a whole, pointing to the considerable opportunities that remain within such a large market. With credit quality moving up the agenda and key to the reopening of the structured finance markets, lenders are tightening their lending criteria with regard to both loan-to-value ratios and financial assessment.”

Asked about the factors needed for a return to normality in the industry, over a third of lenders stressed the importance of re-opening the securitisation markets, and over a quarter the availability of more liquidity in the market. By the end of 2008, lenders expect Bank base rate to be at least 0.5% lower than they thought at the time of the last survey in the summer.