Proactive Investors - UK mortgage availability turned positive for the first time in over a year in the past quarter, the latest Bank of England survey showed, but
But amid recent banking sector wobbles, lenders to plan a tighter supply of new mortgages in the second quarter.
The survey was carried out in the first two and a half weeks last month, amid the collapse of Silicon Valley Bank and fall of Credit Suisse (SIX:CSGN), with lenders asked about conditions in December to February.
Recent mortgage approval data for February showed the first improvement since last summer, but remained more than a third below their levels from a year ago as high borrowing costs squeeze household spending.
The quarterly BoE credit conditions survey showed rising default rates across mortgages, consumer credit and loans to both large and mid-sized businesses, with banks expecting defaults to increase further in the current quarter.
Also, losses given default on mortgages increased and were expected to increase further this quarter.
"The headline mortgage availability balance of the credit conditions survey turned positive for the first time in over a year in Q1," said Andrew Wishart at Capital Economics.
"The collapse of SVB while the survey was in the field probably helps explain why credit conditions were expected to tighten again in Q2. But the main reason mortgage approvals were at a similar level to 2008 in Q1 was weak demand due to higher mortgage rates."
He said lenders "may not tighten credit conditions in Q2 as much as they anticipated in the survey given UK banks appear more robust than some of their troubled peers overseas".
But given that mortgage rates are not expected to fall much until next year, Wishart predicted weak demand "will mean lending remains depressed".
Shares in listed banks were mixed on Thursday, with Lloyds Banking Group (LON:LLOY) PLC down 2.62%, but Natwest (LON:NWG) Group PLC and Barclays PLC (LON:BARC) rising 0.8%, HSBC Holdings (LON:HSBA) PLC, Standard Chartered PLC (LON:STAN), OSB Group PLC and Virgin Money UK PLC (LON:VMUK) all hovering between 0.3% to 0.4% higher.