According to the Bank of England’s (BoE) Credit Conditions Suvery for Q2 2008, lenders believe that the availability of mortgage finance will continue to tighten over the next three months.

The survey found that the availability of secured credit for households had reduced in Q2, with lenders reporting that expectations of further falls in house prices had been a contributing factor. With house prices still falling and the expectation that this will continue, lenders expect there to be a further tightening of secured credit in the next three months. When reporting back about demand, lenders found that the fall in demand for secured credit had declined beyond their expectations and that they expected this to continue into the next quarter. The number of people defaulting on their mortgage repayments also increased beyond expectation and again lenders believe that this is set to increase further through the next quarter.

Neil Johnson, spokesman for the Building Societies Association (BSA), told PIN: “With the prospects for the housing market remaining poor, it is no surprise that lenders are taking a cautious approach to future business levels. However, despite this, the record performance of building societies in the savings market means that they are open for business and are able to lend to borrowers who meet their criteria.”