In the Bank of England’s Credit Conditions Survey for Q1 2022, which surveys banks and building societies predictions and observations around unsecured and secured lending, found that secured lending for house purchase had increased in Q1. Secured lending for house purchase is also expected to rise in Q2.
Demand for secured lending for remortgaging rose in Q1 and this trend is also expected to continue into Q2.
Lenders said that overall spread on secured lending to households, which is relative to the bank or rate appropriate swap rate, had narrowed in Q1 and this would be “unchanged” in Q2.
The net percentage balance for changes in default rates on secured loans to household loan fell in Q1. However, the report said that this would rise in Q2.
It continued that the net percentage balance for changes in losses given default on secured loans fell in Q1 and was predicted to be unchanged in Q2.
Lenders have plenty of liquidity and are ‘keen to lend’
Mark Harris, chief executive of mortgage broker SPF Private Clients, said the figures showed “strong activity in the housing market” as demand for mortgages had risen in Q1 and was expected to continue into Q2.
He added: “Remortgaging activity is also on the rise, as borrowers rush to take advantage of cheap mortgage rates before they become more expensive.”
Harris said that spread had narrowed as lenders had “absorbed some of the rising cost of lending”. He believes this shows that lenders had plenty of liquidity and were “keen to lend”, and although mortgage rates were rising they were still historically cheap.
“The availability of finance is one of the main factors driving the property market and, with competitive products still very much available, that is unlikely to change for the foreseeable future,” he added.
Lenders ‘building in more cautious approach’
Jeremy Leaf, North London estate agent and a former RICS residential chairman, said that the figures show a rise in demand, but the greater impact of the cost of living crisis was yet to ramp up when the BoE was conducting its survey.
He said: “The increase in house purchase demand reflects buying intentions from before the rising cost of living began to take effect.
“At the sharp end, we have noticed some lenders are already building in a more cautious approach to their decision making, which is inevitably compromising confidence among buyers.”
He added that there was “still plenty of demand” and while supply was growing it was “not keeping up fast enough”, which in turn would further push house price growth.