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21 Jan 2021 | 10:03

UK lenders forecast slowing demand for mortgages

(Sharecast News) - Demand for mortgages is expected to ease in the coming months, a Bank of England survey of UK lenders found on Thursday, while borrowing on credit cards is set to rise. The BoE's quarterly survey of major UK lenders - which was carried out before the latest round of lockdown restrictions were introduced across England - assessed lender expectations through to the end of February.

Mortgage approvals have jumped in recent months, with UK average house prices rising by 7.6% in the year to November 2020 to reach record highs. The market has been boosted by pent-up demand, after the first national lockdown, and the stamp duty holiday.

However, the market is expected to start cooling as the tax threshold returns to its normal level at the end of March. There are also concerns that unemployment will rise as government support measures, such as the furlough scheme, come to an end.

Overall, survey respondents found demand for secured lending for house purchase had increased in the fourth quarter, while demand for secured lending for remortgaging was unchanged.

But looking ahead, the survey noted: "Demand for secured lending for house purchase was expected to decrease slightly in the first quarter, but demand for secured lending for remortgaging was expected to increase slightly."

In contrast, defaults on secured lending, which remained unchanged in the fourth quarter, were expected to increase during the start of 2021.

Unsecured lending, meanwhile, increased in the fourth quarter "and was expected to increase further" in the next three months. Within the overall figure, demand for credit card lending increased slightly and was expected to continuing rising. Demand for other unsecured lending is expected to remain unchanged.

Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: "The winter has sent a chill through the banks, as the impact of the pandemic starts to bite. More people are set to fall short on mortgage and credit card payments, while an outbreak of cold feet in the property market is likely to mean less demand for mortgages for house purchases.

"The heat is coming out of the housing market as the stamp duty holiday draws to a close, and much of the pent-up demand has worked its way through the system. But there are also signs that bleaker aspects of the pandemic are starting to make themselves felt."

The survey was carried out between 23 November and 11 December.
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