At last there is some good news for debt-ridden British consumers: instead of the expected increase in mortgage rates, about which we have written repeatedly in the past, the rates might actually be heading down in the near future.
The news comes after a survey by the Bank of England released a few days ago predicted a meaningful narrowing of mortgage rate spreads during the final quarter of this year. It also renewed fears over the economies of Eurozone countries.
The IMF warned of a slump in Eastern Europe and the German economy posted weaker than expected results, causing stock markets across the globe to plummet.
This means banks will have no choice but to compete for limited demand from consumers, and cutting interest rates might be the best option open to them.
Credit availability dropped for the first time in two years, which lenders attribute to a changing risk appetite, the Mortgage Market Review and expectations for residential property prices. Lenders reported that they were less prepared to lend more than 90% Loan-to-Value for the first time since the Bank started asking this question last year.
The survey also mentions: “Many lenders noted that operational issues associated with the implementation of the Mortgage Market Review had pushed down on credit availability over the summer.”
Credit score criteria were also reported to have become stricter during the third quarter, which is consistent with the drop in availability.
Lenders, however, expect both approval rates and loan availability to increase during the fourth quarter because of ‘market share objectives’.