Mortgage lending to be cut back further

The Bank of England's latest Credit Conditions Survey forecasts a further tightening of lending this year.

The Bank of England has forecast that mortgage lending is going to be tightened this year as the economic outlook worsens.

The Bank’s quarterly Credit Conditions Report asks lenders for their take on the availability of credit and what they think will affect it.

Despite lenders saying that slightly more credit would be available in the first quarter of this year, the Bank has taken a more pessimistic view in its report.

In response to a question from the Bank about why credit availability will change, in this case increase, lenders said the main reason was an increase in competition to gain market share.

And we’ve already seen this with a raft of discounts and offers, with some lenders offering fee-free mortgages and others cutting rates.

Despite this, high deposits and tough credit scoring look to be here to stay for the foreseeable future, with the Bank reporting that “lenders expected a tightening of credit scoring criteria”.

The Bank pointed to the general economic outlook and tougher conditions in the wholesale markets lenders borrow from as more immediate concerns.

It also noted that lenders said that the ongoing crisis in the Eurozone would be a key factor in whether credit dries up in the future.

Demand for mortgages dropped at the end of 2011, with lenders expecting this to continue into this year.

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