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Home loans market to shrink further, says BoE

04 April 2008

Householders looking to refinance or coming off fixed-rate mortgages are likely to experience more pain in the next quarter, according to the Bank of England (BoE).

The Guardian is reporting that the already shrinking mortgage market is likely to come under more stress because of still deteriorating conditions on money markets and the inability of banks themselves to secure reasonably priced credit.

And despite recent interest rate cuts, homeowners are getting no joy from the banks, some of whom are failing to pass on the cuts.

"In the three months to mid-March, lenders reported a reduction in the availability of credit across the full range of their lending activities to households and corporates," the BoE survey said.

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, told the Guardian that he was no surprised by the BoE findings and that banks were more likely to tighten credit in the next little while.

"Many will find the availability of finance limited and the cost of borrowing challenging as purse strings tighten in response to economic conditions," he added.

Housing experts hope that the BoE can steer a soft landing for the housing market in the face of falling house prices and the credit squeeze.