Lenders predict slump in mortgage demand in Q1: BoE

Mortgage demand fell in Q4 and is expected to remain subdued in the first quarter of 2022, according to the latest Credit Conditions Survey from the Bank of England.

Related topics:  Mortgages
Rozi Jones
13th January 2022
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"Many brokers will be left scratching their heads at the fact lenders are saying demand tailed off in the three months to November."

Mortgage lenders were asked to report changes in Q4 and expected changes in Q1 2022.

Lenders reported that the availability of secured credit to households increased in Q4 and is expected to increase further over the next three months.

However, lenders reported that demand for house purchase lending decreased in Q4, and was expected to decrease again in Q1. Demand for remortgage increased in Q4, but is expected to decrease slightly in Q1.

Mark Harris, chief executive of mortgage broker SPF Private Clients, commented: "Lenders have money to lend and remain keen to lend it, reporting that the availability of secured credit increased in the final quarter of last year and is expected to rise further in this quarter. However, at the same time, demand for mortgages for house purchase decreased in Q4, a trend which is forecast to continue this quarter. This may be down to the fact that the stimulus of the stamp duty holiday has been removed, with the housing market expected to settle down a little from its previous frenzy.

"There was a pick-up in remortgaging in the fourth quarter, although this is expected to fall away slightly this quarter. However, with many mortgage deals set to expire this year, it is likely that many borrowers will take the opportunity to remortgage, particularly given the cheap fixes still available and the potential threat of rising interest rates.

"Spreads narrowed as mortgage pricing remained competitive, a trend which is expected to continue in the coming quarter. This is good news for those who have yet to make their move, who will require a mortgage, as well as for those remortgaging."

Dominik Lipnicki, director of Your Mortgage Decisions, said: "As with the rest of 2021, the mortgage and housing markets remained exceptionally strong throughout the fourth quarter, with demand for mortgages as robust as ever. Lenders were keen to lend and borrowers were keen to borrow. With that in mind, there's a definite disconnect with lenders saying demand decreased. Following on from Rishi Sunak's Budget and the anticipated Bank of England base rate rise, we did see an increase in mortgage rates offered in the final months of 2021, and as long as you could qualify for a mortgage, the deals were still at near record low levels."

Ross Boyd, CEO of mortgage switching platform, Dashly, added: "Many brokers will be left scratching their heads at the fact lenders are saying demand tailed off in the three months to November. In our experience it was as strong as ever and the loans were there to accommodate it. Remortgages were particularly strong during the final quarter of 2021. On that I think everyone can agree. The prospect of rate rises was increasingly on people's radars and this incentivised many to act. Lenders were competing hard on rates even at higher loan-to-values, and this was another key driver, especially for first-time buyers. The ongoing race for space was another key factor in strong activity levels and we expect this to continue into 2022. In the coming quarter, another Bank of England rate rise is likely and this will doubtless feed through into mortgage rates, but even then rates remain stupendously low, especially at lower loan-to-values. With inflation soaring and the cost of living really starting to bite, lenders are likely to be more cautious and conservative in their lending in the months ahead as they brace for a period of economic turbulence. But demand for property remains strong and is being underpinned by a robust jobs market. Remortgages are likely to see the most activity levels as people set out to lock into the lowest rates possible ahead of any rate rises. January already has seen an exceptional amount of remortgage enquiry levels across the broker community."


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