Demand for mortgages drops as buyers put brakes on house sales
BRITAIN’S housing market has got off to the worst start to a year since 2015 as buyers have slammed on the brakes, sending demand for mortgages through the floor and stunting prices.
In February 63,900 mortgages were given to home buyers, the Bank of England said, down steeply from 68,700 a year earlier.
Demand for loans fell at the steepest pace since the aftermath of the Brexit vote, with landlords and owner-occupiers cutting back.
The Bank’s index of demand fell to minus 29.3pc from a positive score of 8.3pc in the final three months of 2017, indicating the proportion of lenders that reported falling demand sharply outweighed those reporting an increase.
Banks said that they were increasing the availability of loans to borrowers, particularly those with small deposits.
Interest rates on two-year fixed loans for homebuyers with deposits of 10pc of the property value have fallen by 12 basis points since August despite the November rate rise and the expectation of another in May, though costs for borrowers with larger deposits have increased.
However, the survey showed that the number of mortgage applications that were turned down had increased to the highest proportion since net balance of 18.5pc.
Hansen Lu at Capital Economics said that lenders expect mortgage demand to bounce back in the second quarter, “with a hefty 23pc balance expecting a rise in the coming quarter”, adding that a small balance of lenders expect the 2012, with
aavailability of credit to continue rising in the next quarter.
“That expectation seems to stem from market share objectives, as a balance of 26pc of lenders expect competitive forces to push up credit availability in the second quarter – the highest reading seen in five years. Taken together, that seems consistent with our view that mortgage lending is unlikely to deteriorate much further over the remainder of the year.”
Meanwhile, banks are slashing access to consumer credit at the fastest pace on record, tightening up criteria for credit card applicants and cutting back interest-free periods. The Bank of England has warned lenders that surging consumer borrowing is an increasing risk to stability. Elizabeth Martins, an HSBC economist, said: “Lenders are getting more cautious, perhaps as a consequence of the weaker consumer environment and slower economy, but perhaps also in response to the Financial Conduct Authority’s concerns about credit card debt.”