Economists have been warning that lending would be tightening over the next year. Now they are saying it could be longer. Moody’s Investor Service reported that a rise in either interest rates or unemployment would have a significant impact on loan performances as borrowers struggled to keep payments current. Banks and building societies will be forced to tighten up even more. Mortgage and remortgage seekers will then find it increasingly difficult secure lending. 

"Moody’s believes that the next few quarters will be characterized by a number of key credit themes that will culminate in sustained pressure on the sector’s profitability," said VP-Senior Credit Officer Marjan Raggi.

"We expect to see continued consolidation of weaker lenders into larger and stronger entities, thereby strengthening the system in the long run," Raggi added.

Stronger lenders such as Santander, Nationwide, and Co-Operative Bank are better placed due to their larger scale business and ability to offer more diverse products. Smaller Building Societies who find it harder to draw in new customers away from larger banks are especially hard hit from the economic crisis and the lending crunch.

Those seeking a mortgage or remortgage will find it harder in the months ahead as lenders tighten up on loan approvals. Mortgage borrowers can expect higher deposit requirements and those seeking remortgage will have to have higher equity values. Meanwhile, until rates are increased or numbers reported on inflation increases or unemployment increases, borrowers can still take advantage of attractive products from lenders with historically low interest rates attached.