MNI Policy: BOE Data: Mortgage Supply Shrinks, Spreads Narrow

By David Robinson and Jai Lakhani

     LONDON (MNI) - The Bank of England's third quarter credit conditions survey

found that lenders reported mortgage availability shrunk in the third quarter

and was expected to atrophy more rapidly in the fourth, while lending spreads

were expected to narrow markedly.

     -The survey highlights how the BOE Monetary Policy Committee's two rate

hikes are only trickling through to borrowers, as spreads are tightening.

     The survey said that spreads on secured lending to households, relative to

both Bank Rate and swap rates, narrowed slightly in the third quarter and "were

expected to narrow significantly in Q4."

     This spread narrowing is occurring in both the buy-to-let and residential

mortgage sectors.

     -The availability of secured credit to households declined in the third

quarter and was expected to decrease further in the fourth quarter.

     The balance of lenders expecting to increase secured credit in the fourth

quarter fell to -14.8 from a balance of 4.0 in the second quarter.

     -The survey found that demand for secured borrowing was flat-lining. In the

third quarter the balance of demand for secured lending was -3.4, worse than the

expected 0.7 and was expected to move back to 0.2, virtually flat, in the fourth

quarter.

     -Two areas where demand rose were re-mortgaging and unsecured lending.

     The BOE data showed overall demand for unsecured lending increased

significantly in Q3 due to credit card lending.

     Lenders, however expected a slight decrease in the demand for unsecured

credit in Q4.

--MNI London Bureau; tel: +44 203-586-2223; email: david.robinson@marketnews.com

[TOPICS: M$B$$$,M$E$$$,M$$BE$]