On top of this, 60 per cent have tightened criteria relating to income and financial assessment.
“Lenders have a realistic but optimistic perspective on the market, which will be supported by good levels of remortgaging activity and a reaffirmation of prudent lending practices," said Peter Williams, IMLA’s executive director.
"They are noticeably more upbeat about their own firm’s volumes than they are about the market as a whole, pointing to the considerable opportunities that remain within such a large market.
"With credit quality moving up the agenda and key to the reopening of the structured finance markets, lenders are tightening their lending criteria with regard to both LTV ratios and financial assessment.”
Asked about the factors needed for a return to normality in the industry, over a third of lenders stressed the importance of re-opening the securitisation markets, and over a quarter the availability of more liquidity in the market. Taken together it is clear the issues of liquidity and the need to restore functioning capital markets dominate their thinking.
By the end of 2008, lenders expect Bank base to be at least half of one percent lower than they thought at the time of the last survey in the summer.
Williams continued: "The differential between Base rate and LIBOR should contract further – although even by end 2008 it would remain wider than it has been historically. Forecasts for 2 year fixed rates, falling from 5.73 per cent at end 2007 to 5.42 per cent, provide further indication that we are moving into a downward phase for interest rates, which is positive news for homeowners even if it does presuppose a less buoyant economy.”
