Lenders told the central bank that demand for house purchase lending was “unchanged” in the first quarter of the year, but was expected to drop in the second quarter. In contrast, demand for remortgaging had increased significantly in the first quarter, with lenders predicting further growth here.
Despite these demand fluctuations, lenders told the Bank of England that supply of mortgage deals had increased slightly in the three months to the end of February, and was likely to be unchanged over the next three months.
While spreads were suggested to have remained unchanged over the quarter, they were forecast to widen in quarter two. Meanwhile default rates were reported to be stable.
Subdued market leads to competition
Mark Harris, chief executive of SPF Private Clients, said he was not convinced by the suggestion that swaps would widen, arguing that a subdued housing market was resulting in “a very competitive lending market”.
He continued: “With supply outstripping demand, this is keeping a lid on any mortgage rate increases as lenders compete with each other to attract business. The market is ultra competitive and because of this we expect pricing to remain where it is, with lenders continuing to accept tight margins.”
No change is good news
Jeremy Leaf, former residential chairman of the Royal Institution of Chartered Surveyors and now an estate agent, suggested that the fact that there had been little change from last quarter was actually good news, as the “doom and gloom hanging over the property market” might have resulted in a fall in activity.
He continued: “The spring market has brought more realism to some buyers and sellers and we are seeing evidence of a little bit more optimism although it is very patchy and varies considerably, even in areas which are close to one another.”