Mortgage lenders to tighten credit standards in coming months, report says

Mortgage deals appear to have been growing increasingly attractive and affordable in recent years, but a new study suggests that borrowers with smaller deposits – such as first-time buyers – might find it more difficult to get on the property ladder in coming years.

According to a study carried out by the Bank of England in recent weeks, UK mortgage lenders are likely to tighten their credit standards in coming years amid concerns about the UK economy.

The Bank’s latest Credit Conditions Survey, which was carried out over the course of May and June this year, quizzed high street banks and mortgage lenders to determine their predictions over the remainder of the year.

It found that, between now and September, the vast majority of lenders will be narrowing their credit standards – a change which is most likely to affect borrowers with deposits of 25 per cent or less, according to those quizzed.

It is thought that borrowers with even lower deposits – such as first-time buyers with deposits of ten per cent or less – will be the hardest hit by the changes.

The survey also found that lenders expect the availability of mortgages to fall slightly between now and September due to ‘a changing appetite for risk’.

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Nigel is the Managing Partner and Head of Litigation and Dispute Resolution in the London office of Mackrell Turner Garrett.