MSE News: Mortgages could become harder to get

Former_MSE_Guy

This is the discussion thread for the following MSE News Story:

"It could be tougher to get a mortgage over the next three months, a Bank of England survey of lenders has found ..."

Read the full story:
Mortgages could become harder to get

Paul_Herring

"Banks being sensible about who they lend to" Bank of England warns...

originalmiscellany

Not before time I say.

Thrugelmir

Gentle turning of the screw.

jamesd

The data on which this report is based seems to be available at Credit Conditions Survey - 2011 Q4 and the index page to that and the annexes is here.

[STRIKE]As is sometimes the case, the story at MSE seems to directly contradict what the source it's based on says. Specifically:

The story says that ""The report is further worrying news for those seeking a mortgage after the Bank of England warned last month that costs are likely to rise."

The Bank of England says "Lenders reported that spreads on secured lending to households — relative to Bank Rate or the appropriate swap rate — narrowed slightly in 2011 Q4. Lenders expected spreads to fall further in Q1."

So the Bank is now saying pretty much the opposite of what the story included. While the story may be right about the past, it doesn't seem particularly useful when there's better current news to report.[/STRIKE]

A bit of background for one item which is, as is more often the case, entirely consistent with the apparent source:

The report says: "Lenders predict the credit scoring criteria for granting loan applications will be tightened in the first three months of this year, meaning approvals will drop in the next few months. ... Only those with the very best credit histories may be able to get funding for a property purchase."

The Bank says: "Despite the expected pickup in credit availability, lenders expected credit scoring criteria for granting loan applications to be tightened in Q1. Consistent with this, lenders expected the proportion of total loan applications being approved to fall over the coming quarter (Chart 2) with some lenders commenting that they had revised down expectations for households’ disposable incomes and hence the affordability of taking out new secured loans. ... The availability of secured credit to households was reported to have been broadly unchanged in the three months to mid-December 2011. Lenders expected availability to increase a little in the next three months." Secured credit largely means mortgages. And "Overall availability of secured credit was expected to increase slightly in 2012 Q1 with the increase concentrated on borrowers with high loan to value (LTV) ratios." High LTV of course means mainly first-time buyers, so those with good credit may find it easier to get a loan.

Some more good news is that the Bank of England says "Lenders reported that spreads on secured lending to households — relative to Bank Rate or the appropriate swap rate — narrowed slightly in 2011 Q4. Lenders expected spreads to fall further in Q1." Margins have been way over funding costs sine the financial crisis started back in 2008 so some reduction on that is very welcome.

I recommend a quick read of the survey for anyone who's interested in this. It's only a few pages.

Thrugelmir

jamesd wrote: »

The Bank of England says "Lenders reported that spreads on secured lending to households — relative to Bank Rate or the appropriate swap rate — narrowed slightly in 2011 Q4. Lenders expected spreads to fall further in Q1."

So the Bank is now saying pretty much the opposite of what the story included. While the story may be right about the past, it doesn't seem particularly useful when there's better current news to report.

Spread maybe falling. However interbank lending rates have been rising steadily upwards. So the actual cost to the borrower is increasing.

Paulgonnabedebtfree

Thrugelmir wrote: »

Spread maybe falling. However interbank lending rates have been rising steadily upwards. So the actual cost to the borrower is increasing.

Indeed, the 3 month LIBOR (on which my mortgage is based) has gone up c.0.02% just in the last three weeks.

On December 16 2011, it stood at 1.06475 %
The figure one year ago was 0.75750 %.

I know that doesn't sound much but that sort of creeping up has been going on for some months now.
Over a year, that sort of gradual increase is about 0.3%. For my mortgage, that would be something like a £270 increase over the year. With other household costs (and my business costs) rising, if I were on a fixed income that might be a bit tricky. Fortunately, it just means me doing a little more work each month. No problem so long as the work is out there.

This is still way down on earlier years though - 2009 and earlier.

Nelly1977

I've recently been looking at houses, as a first time buyer it is all very daunting when it comes to the mortgage side. The last few months I've learnt a lot I was rejected the first time on the credit scoring. The same system that is used by many finance company's shops etc, but honestly a mortgage is a commitment for years and years ,like the council rent I've paid for the last ten years on time every month. But this is not taken into account but the loan for peanuts which in missed a payment for while I was unemployed so I could pay my rent instead was . The gremlins of my past come to haunt me, now all my debts are paid off and settled and have been for some 3 years plus but the so called credit scoring system gives me a poor score because I don't have credit ! Honestly ! So now I've been told to get a credit card to get a better credit score.

And we wonder why we have global financial difficulties

The_Road_Warrior

Nelly1977 wrote: »

And we wonder why we have global financial difficulties

What? Because you have bad credit? I'd say things are looking up because they are no longer throwing money at anyone, which is what got us into this mess!

Daelim

The_Road_Warrior wrote: »

What? Because you have bad credit? I'd say things are looking up because they are no longer throwing money at anyone, which is what got us into this mess!

What, so it's fair to punish someone for 6 years if they fell on hard times or were poor with money management in their late teens early 20's?

I put it to you that the problem lies in a lack of financial education in school which got us into this mess.

Paul_Herring

Daelim wrote: »

What, so it's fair to punish someone for 6 years if they fell on hard times or were poor with money management in their late teens early 20's?

I believe that something that happened 'last year' has more weighting than something that happened '6 years ago.'

And, yes, it's fair to discriminate differently between someone who didn't manage their finances and someone who did. Could you provide a (reasonable) example of where those two people shouldn't be treated differently? (Your education example below won't be it.)

I put it to you that the problem lies in a lack of financial education in school which got us into this mess.

Rubbish. 'Financial education' in schools didn't happen in the 70's, 80's or 90's. People educated during those decades are perfectly capable of managing their finances (along, granted, with lots who aren't. Education won't solve that.)