The number of mortgages made available fell in Q3, marking the first drop in availability for more than two years.
Lenders reported to the Bank of England that supply and demand for home loans fell in the three months until early September.
New affordability rulings from the Bank’s policymakers led to the squeeze but lenders have suggested they expect mortgage availability to pick up again.
This is backed up by the Bank’s Credit Conditions Survey, which suggests that both demand and availability will increase.
Regulations impacting on availability
Regulators announced that lenders would have to adhere to strict rules relating to mortgages – essentially meaning they could only be offered to those with realistic repayment plans.
Restrictions relating to loan to income ratios were the main cause, with the Bank keen to see that irresponsible lending practices were halted.
As a result of this, levels of approvals dropped as lenders decided applications were not in keeping with the new rulings.
Lenders also told the Bank of England that competition is increasing in the mortgage market, as both banks and building societies compete for new custom by reducing rates.
Growth expected before 2015
Many lenders will have targets for the year and the final quarter is expected to see activity as they strive to meet those goals.
This in turn could enhance the levels of available mortgages, although solid repayment plans will still be required.
The increasing competitiveness among lenders is driving down rates, while the number of people falling behind on repayments is also falling, it was reported.
Several lenders have cut prices and have launched new products in recent weeks, while others are offering incentives in a bid to draw in custom.
Credit availability for businesses did not change in Q3 when compared to the previous quarter, according to the Bank’s survey while lending to small businesses dropped slightly.
Ensuring payments with good financial management
Keeping up with mortgage payments requires people to have a firm grasp on their finances, ensuring that funding is always available to cover costs.
This can be done by limiting spending elsewhere and by budgeting effectively – a prepaid card can assist in this process as it limits spending to the amount on it at any given time.
That way, households can load a certain level of disposable income onto the card, while keeping other funds set aside for housing payments and other essentials.
As there is no credit facility, the cards prevent someone from racking up debt while a prepaid card can be used in a number of locations, including at cash machines, in shops and online.
