Mortgage demand fell sharply in Q3: BoE – Mortgage Strategy
Mortgage demand fell sharply in the third quarter, while lenders also reported a reduction in the availability of secured credit, according to the Bank of England.
The net balance for demand for house purchase mortgages fell to -37.1 in the three months to the end of August, from +14.9 in the previous quarter.
This negative net balance figure reflects the proportion of lenders reporting an increase minus the proportion reporting a decrease.
Remortgage demand also swung lower, with the balance dropping from +42.5 in Q2 to -32.5 in Q3, the BoE reports.
However, lenders expect demand to recover over the next three months. The forward-looking balance was +9.8 for house purchase and +23.1 for remortgaging.
The availability of secured credit to households also decreased, with the balance falling from +2.6 in Q2 to -15.5 in Q3.
Lenders expect availability to increase slightly over the next three months, with a balance of +5.1.
Overall spreads on secured lending, relative to Bank Rate or the appropriate swap rate, narrowed during the quarter and lenders expect them to narrow further in Q4.
Default rates on secured loans decreased slightly in Q3 and are expected to remain broadly unchanged over the next three months.
Broadstone senior director of banking and credit advisory Richard Pinch says: “While lenders are expecting demand for mortgage and remortgage lending to pick up in the final quarter, there are reasons to question how quickly that recovery will come through.
“With the Autumn Budget looming and BOE interest rate hikes potentially on the horizon, households may remain cautious about making major financial commitments.”
Pinch adds: “For lenders, understanding individual affordability will remain key in this uncertain environment.
“A more nuanced assessment of borrowers’ financial circumstances will be essential to ensure consumers can access credit where appropriate, while avoiding commitments that may become difficult to manage if household finances come under further pressure.”
