Borrowers to face rate rises

HOUSEHOLDS and businesses will find it tougher to get loans in the coming months as default rates are poised to increase, a survey of lenders suggests.

The Bank of England’s credit conditions survey of banks and building societies, carried out in September, found lenders anticipate they will tighten their credit scoring criteria in the months ahead.

Many temporary measures have been put in place by lenders to help cushion the financial shock of the coronavirus crisis for customers.

But there have also been signs that lenders are becoming warier about offering riskier loans, with the number of low deposit mortgages on the market having reduced dramatically since lockdown.

One mortgage professional commenting on the report said some first- time buyers increasingly feel their chance of getting a home loan is “somewhere between slim and zero”.

The report said that while lenders expect mortgage availability to remain unchanged over the three months to the end of November, credit scoring criteria had tightened in the previous three months and is expected to tighten further in the coming quarter. This indicates some households will have higher hurdles to clear to get a mortgage.

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “Borrowers who have found it harder to get a mortgage will not be surprised to hear that lenders tightened criteria in the third quarter and expect to tighten further in the run- up to the end of the year.

“Concerns about the impact of the pandemic on earnings and what will happen to property prices, particularly for those borrowing at high loan- to- values, are behind this growing caution.

“Mortgage pricing is on the rise, a trend expected to continue over the course of the rest of the year.”

The report also found credit scoring criteria for non- mortgage lending to households, such as credit cards and personal loans, also tightened and a further squeeze is expected.

This could come at a time of rising demand, as the report said lenders believe demand for credit will increase over the next quarter.

‘ Lenders tightened criteria for high loan to value mortgages’