Mortgage price war – Are we set for a ‘mortgage price war’?

Mortgage price war

A mortgage price war is set to rear its head in the final quarter of the year as lenders try to regain market control, when they’ve had a significant reduction in the availability of loans over the summer.

According to the latest Credit Conditions report as released by the Bank of England, UK lenders expect to see an increase in the availability of mortgages in the final quarter of 2014, after a considerable increase in the activity in the three months leading up to early September.

The survey undertaken by the Bank of England discovered that banks and building societies were less willing to offer loans due to the ever changing mind of lenders’, as their concerns regarding house prices drove down their interest in loans.

The issues attached to the introduction of the mortgage market were joined with the affordability rules in April, as the restrictions on loans regarding income had a considerable impact on the mortgage market and its availability.

However, the changes that seemed to present themselves were only temporary, as economists and brokers have claimed that consumers are set to gain considerably as lenders would begin to compete for shares in the market. Recent weeks have witnessed a mortgage price war with a flurry of price cuts, with some lenders going as far as offering iPads and council tax payments to entice potential lenders.

The survey in summary discovered that lending was restricted across all forms of mortgages, including those for borrowers who could offer large deposits. Despite the offer of a mortgage guarantee for up to 95% loan to value through the Government’s ‘Help to Buy’ scheme, lenders suggested they would be less willing to lend at more than 90% loan to value. Credit scoring also tightened over the three months, with a fall in the number of household approvals for loans.

Lenders also suggested that the demand they received from borrowers had seen a significant reduction, something which broke a trend of increasing demand since the start of 2012. Within the period, demand for buy-to-let loans actually increased, something which is expected to rise once more in the last quarter of the year.

The report released by the Bank of England found that lenders had actually increased the current availability of unsecured credit through different products like personal loans and credit cards. This is expected to continue before the end of the year greets us.

Despite all of this, smaller businesses have claimed that they did see their levels of access to credit decreased over the summer months, whereas medium sized businesses were more likely to be accepted for loans based on their size.