The latest Credit Conditions Survey from the Bank of England quizzes mortgage and secured loan lenders on their attitudes to lending over the past three months and the coming three months.

Mortgage and secured loan lenders were asked whether they felt there had been any change in the use of securitisations associated with mortgage and secured loan lending in the three months to September, with a net balance of 4.7% lenders reporting more securitisation deals.

But this balance jumps almost 20% to 23.6% when mortgage and secured loan lenders are asked about the prospects for securitisation deals over the coming three months, making the reading the most positive mortgage and secured loan lenders have felt about securitising assets since June 2007.

Mortgage and secured loan lenders reported that prospects for house prices were also looking good, which they say will have a positive impact on credit availability over the next three months.

This is the first time mortgage and secured loan lenders have responded positively on house prices and credit availability since the question was first asked in the survey in Q4 2007.

Mortgage and secured loan lenders recorded an unexpected reduction in arrears over the past three months, the first improvement since Q3 2007.

Arrears are expected to increase over the next three months but to a much lesser extent than previously thought, mortgage and secured loan lenders believe.

Mortgage and secured loan lenders also claim that interest from prime borrowers has fuelled an increase in house purchase demand, but say that demand for buy to let remained unchanged over the last three months.

They predict a decline in house purchase demand over the next three months, partly to do with the time of year, but are forecasting that this will be balanced by a growth in remortgage and secured loan enquiries.

Spreads on secured loan lending are said to have widened over the last quarter though this trend is expected to reverse over the next three months.

Mortgage and secured loan lenders also report that maximum LTV ratios stabilised over the last three months, as had credit scoring criteria, which is predicted to remain tight.

Overall though lenders were positive about prospects for mortgage and secured loan lending and credit availability.

They told the Bank that the proportion of loan applications being approved had increased over the last three months and also that the average credit quality of new secured lending had risen.

Posted 01/10/2009 12:19:55