British lenders foresee the largest drop in demand for mortgages since mid-2020 during the three months to the end of August, an additional sign that the housing market is crashing in the face of soaring inflation.
The Bank of England’s quarterly Credit Conditions Survey confirmed the net balance of expectations among lenders for mortgage demand fell to -41.9. Expectations were last lowest in the second quarter of last year and the last time there was dampened demand was in the second quarter of 2021.
Thursday’s BoE survey – which was conducted between May 30 and June 17 – agrees with the sentiment from members of the Royal Institution of Chartered Surveyors, who said house prices jumped in June at the most sluggish pace since March last year.
Since February 2021, British house prices have risen by more than 20%, boosted by low mortgage rates, increased working from home, and higher disposable income among richer households – trends that are all now vice versa.
The BoE survey showed mortgage lenders expected to hike by the greatest level since the end of 2021 the extra interest rate margin they charge beyond their finance costs. The lenders also foresee further mortgage defaults – although their previous forecasts for this have often not transpired.
For unsecured lending, lenders expected demand to be strong while the intent to limit supply slightly as they approve lesser credit cards and loans as a result of borrowers’ worsening financial situation.
Business lending was foreseen to remain mostly unchanged.