The time is now for smaller banks to take great strides forward in the amount of lending they are approving due to the Bank of England pushing for lighter regulations being applied to smaller banks.  It is believed that larger banks have an inbuilt advantage over smaller banks and borrowers should benefit from having a bigger list to obtain funds from.  A similar situation is now occurring in mortgage loans and smaller banks.

The mortage loan market started the year on fire but has since cooled off due to a number of factors.  The Bank of England has expressed a desire to possibly raise the base rate and new lending rules are creating a tighter, cooler housing market which is leading to fewer mortgage loans obtained.

One way to balance out the loan approvals for small and bigger banks is to assign a lower risk weight.  This will make banks hold less capital in reserves against mortgages and other types of lending.  The lowering of risk weights for banks is intended to increase the competition and benefit borrowers, according to research from the BBA or British Bankers’ Association.

Other countries intending to improve competition and therefore improve lending overall are in agreement that lowering risk weights will have this effect.

UK mortgage lending has cooled off over the course of the past few months through a natural correction after the extra-hot start in the beginning of the year.  Remortgages are a different story now.  They have been on fire since the Bank of England has been talking about raising the base rates which would naturally lead to higher mortgage loan rates.