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Lender appetite to improve amid reviving mortgage demand – BoE

  • 11/04/2024
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Lender appetite to improve amid reviving mortgage demand – BoE
Lenders have said the availability of finance to households will rise over Q2 as mortgage demand rises, a survey from the central bank showed.

The Bank of England Credit Conditions Survey revealed that lenders saw the availability of secured credit to households increase in the three months to February and expected this to rise over the quarter to May. 

Responses to the survey are given a positive reading to represent an increase or negative to represent a decline. 

Lenders returned a score of 18.4% regarding the availability of mortgage financing in Q1 and predicted 19% for Q2. 

Notably, the appetite to lend to borrowers with high loan-to-value (LTV) ratios of 75% and higher is predicted to improve. 

Lenders gave a response of 29.3% for the availability of finance to this cohort in Q2. 


Return of mortgage demand 

Demand for loans for house purchase and remortgaging rose in Q1 too, based on a score of 35.9%, which was a significant recovery from the score of -31.6% in the previous quarter. Looking ahead, this demand is set to climb, according to the lender response reading of 23.2%. 

This coincides with insight from the Royal Institute of Chartered Surveyors (RICS) today, which showed a rebound in buyer enquiries. 

Broken down, lenders noted an increase in demand for both prime lending and buy-to-let (BTL), with respective scores of 30% and 27.1% in Q1. Both sectors received negative readings in Q4 last year, with response scores of -31.6% and -38.9% respectively. 

For Q2, lenders expected mortgage demand to remain steady, with response readings of 23.2% for prime lending and 9.9% for BTL. 

Demand for remortgaging was recorded at 52.8% in Q1, a notable rise on the previous quarter’s reading of -27.7%. Looking ahead, demand in Q2 is also set to be positive, with a lender score of 10.6% for the current quarter. 


Defaults to increase 

Although Q2 is expected to be positive for lending activity, lenders also predicted more financial difficulties for borrowers. 

The Credit Conditions Survey received a score of 26.1% for the question of how default rates had changed in Q1, suggesting a rise over the quarter. This was a slight increase from the score of 23.6% in Q4, but better than the response of 43.3% in Q3 last year. 

Going forward, the lender response of 34.2% indicated an expectation for more defaults to come. 

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