Half of lenders see mortgage default rates rising

  • Story by: Sharon Flaherty
  • Magazine: FTAdviser
  • Published Thursday , July 03, 2008

Conditions in the UK mortgage market are set to decline further after lenders said they are to continue restricting secured credit to households over the next three months.

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In the Bank of England's second quarter credit conditions survey, conducted between 27 May and 18 June 2008, lenders were asked to gauge their experience over the previous three months and what they predict for the following quarter.

Lenders said the availability of secured credit to households had already been reduced significantly in the three months to mid-June, with their expectations of falling house prices acting as a contributing factor to tightening in lending.

Looking at demand for secured lending for house purchase, lenders said they expected it to decline over the next three months, after dipping more than anticipated in the three months to mid-June.

The poll found that a net balance of 47.3 per cent of lenders has seen default rates on mortgage loans increase in the second quarter, up sharply from 28.6 per cent during the previous quarter.

A net balance of 50.4 per cent of lenders said they expected default rates to increase over the coming three months - up from 40.1 per cent in the BoE’s previous poll.

Since the credit crunch began, house prices have already fallen month-on-month, bringing prices down by 2.5 per cent in total in the first half of 2008, according to Hometrack.

Earlier this week the Building Societies Association also reported a drop in gross lending by more than £1.3bn over the last year.