Future Retirement Success
  • Politics
  • Business
  • Investing
  • Stocks
  • Politics
  • Business
  • Investing
  • Stocks

Future Retirement Success

Business

Banks set to reign in lending as economic outlook darkens since September’s mini-budget

by October 14, 2022
October 14, 2022
Banks set to reign in lending as economic outlook darkens since September’s mini-budget

Lenders expect the availability of mortgages and consumer and corporate credit to shrink as more people and businesses default on loans.

Rising interest rates and the worsening economic outlook began to affect the demand for credit and its availability even before the turmoil unleashed in the markets by the government’s mini-budget at the end of September, according to research by the Bank of England.

The survey of lenders, conducted between August 30 and September 16, found that the availability of mortgage credit to households rose from -22 per cent to -13 per cent on its sentiment index between July and September, but expectations for the availability of credit over the next three months fell to a balance of -40.9 per cent.

The deteriorating economic outlook, the possibility that house prices will fall and a lower appetite for risk were the main reasons behind lenders’ plans to rein in lending in the final quarter.

Last month house prices rose at their slowest since early in the pandemic. They now look on course to fall as a surge in mortgage costs puts pressure on spending, according to the monthly survey by the Royal Institution of Chartered Surveyors. Inquiries among new buyers ranked among the lowest 5 per cent of readings since the survey began.

Arrears are also beginning to rise as households struggle to make ends meet amid inflation at nearly 10 per cent. The net balance for the default rate rose from -7.6 per cent to 7 per cent and is expected to increase further.

The net percentage balances are calculated based on whether lenders gave a positive or negative response to a question and are weighted based on their market share to give a figure between -100 per cent and 100 per cent.

At the time of the survey, markets had priced in a 4.4 per cent peak in interest rates. The forecast has since risen to 5.9 per cent after a series of unfunded tax cuts announced by the chancellor, Kwasi Kwarteng, prompted a sell-off of UK assets and drove the pound to a record low of $1.03 last month.

Andrew Wishart, senior property economist at Capital Economics, said the rise in remortgaging reflected a rush among borrowers to lock into lower interest rates before they rise further.

The Bank of England has implemented six back-to-back rate rises, taking the base rate from a historic low of 0.1 per cent in December last year to its current level of 2.25 per cent. Another rate rise is expected at the next meeting of the central bank’s monetary policy committee on November 3.

The average quoted rate for a two-year fixed-rate mortgage with a 75 per cent loan-to-value ratio hit 4.17 per cent in September, up from 1.64 per cent at the turn of the year, according to separate data published by the Bank.

“Even before the latest leg-up in mortgage rates, demand for borrowing for house purchase was dwindling with the net balance dropping from +30.4 [per cent] in Q2 to -36.5 in Q3,” Wishart said. “That was driven by lower owner-occupier demand while buy-to-let demand was more resilient.”

He added that expectations for the availability of credit for commercial property were at their lowest since summer 2020. The outlook will have since worsened, given the surge in gilt yields following the mini-budget.

Read more:
Banks set to reign in lending as economic outlook darkens since September’s mini-budget

0
FacebookTwitterGoogle +Pinterest
previous post
Warehouses, offices and shopping centres ‘to lose fifth of their value’
next post
Kwarteng leaves Washington early with another mini-budget u-turn on the cards

You may also like

MBA Programs in Brazil

May 14, 2024

Enhancing Your Manufacturing Business’s Online Reputation with SEO

May 30, 2024

Amazon Founder Jeff Bezos Completes $8.5 Billion Share...

February 21, 2024

AI predicts which online-only stores may make appearance...

July 4, 2023

Retail sales slump in July — can labour’s...

July 30, 2024

Government invests £80 Million in UK Businesses in...

June 29, 2023

Can’t Decide Which Slot Game to Play? –...

August 25, 2022

RumbleTalk Chat: The polling and Q&A solution to...

March 9, 2023

Hunt confirms cut to ‘unsustainably expensive’ business energy...

January 5, 2023

Dragons’ Den: Entrepreneurs secure investment for their pet...

March 28, 2024

    Get free access to all of the retirement secrets and income strategies from our experts! or Join The Exclusive Subscription Today And Get the Premium Articles Acess for Free

    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • European diplomats urge Iran to continue US nuclear talks in first face-to-face since strikes started

      June 20, 2025
    • As Iran talks get underway, expert raises alarm over lack of plan to secure nuclear material

      June 20, 2025
    • Spending and Debt in the OECD

      June 20, 2025
    • Four plead guilty in massive bribery scheme at agency Democrats fought to protect from DOGE

      June 20, 2025
    • RRG Alert Tech Vaults to ‘Leading’—Is XLK Signaling a New Rally?

      June 20, 2025
    • Does ICE Mask Its Agents to Protect Them from Targeted Violence?

      June 20, 2025

    Categories

    • Business (8,275)
    • Investing (2,057)
    • Politics (15,719)
    • Stocks (3,158)
    • About us
    • Privacy Policy
    • Terms & Conditions

    Disclaimer: futureretirementsuccess.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2025 futureretirementsuccess.com | All Rights Reserved