However, demand seems to be reducing suggesting that lending in both the residential and commercial property markets will be very weak this year.
According to the survey a small majority of lenders reported that they increased the availability of secured credit to households in Q4 and intend to do so again in the next three months.
However, the net balance of lenders reporting falling demand for finance, at 41.5%, was the largest that it has been in more than two years. Lenders expect demand for residential mortgages to fall again in the first quarter of 2011.
The commercial sector saw a similar story with lenders increasing the availability of credit while doubts remain as to whether or not the demand is there for the money.
Commenting, Capital Economics said: “Lenders’ weak house price expectations will limit any rise in credit availability in the next three months, as could the worsening economic outlook in the face of the fiscal contraction. As a result, credit scoring criteria are expected to remain tight and the proportion of loan applications approved may well fall.
“On balance, today’s survey does nothing to change our view that 2011 will be a quiet year in the mortgage market, while it also suggests that net commercial property lending flows – which Tuesday’s Bank of England data showed were weak again, at minus £629m, in November – will remain negative for some time to come.”
Paul Hunt, managing director at Phoebus Software said: “A drop in the availability of high LTV mortgages shows that lenders are seriously concerned about the UK’s economic prospects. But what may be of even more concern is that a vicious circle is starting to develop as a result of lenders’ expectations for house prices.
“The market is, to a large extent, being held back by the limited availability of finance which is causing an expectation among lenders that prices will fall and equities will shrink. Demand for secured finance is also falling – as a result of borrowers’ difficulties in putting together sufficiently large deposits – and it seems unlikely that the brakes will come off property prices in the coming months.
“Nevertheless, the market is certainly in better shape than it was during its recession nadir. The demand for credit is still well above the level seen during the depths of the recession and there is no indication that credit scoring criteria have become tougher.
“Lenders are still seeking to lend where they feel they can do so safely, which explains the rises in remortgages and low LTV mortgages. We are beginning to see a two-tier property market, where there are great opportunities for those able to muster large deposits, but those with more limited finance – especially first-time buyers – are being squeezed out.”
