UK lenders report sharp rise in mortgage demand expectations

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UK lenders’ expectations for mortgage demand rose sharply on the finish of final yr, based on official information printed on Thursday, as falling borrowing charges gas a rebound within the property sector.

The index for anticipated mortgage demand for home purchases rose to 21.9 per cent within the closing three months of final yr from minus 28.4 per cent within the third quarter, based on the Financial institution of England’s quarterly survey of banks and constructing societies.

The index tracks the proportion of lenders forecasting a rise in demand over the subsequent three months minus lenders predicting a lower.

Though the index for demand for mortgage lending within the fourth quarter was nonetheless damaging at minus 31.6 per cent, it was up sharply from the minus 54.9 per cent reported within the earlier three months.

Over the identical interval, the online proportion of lenders reporting rising mortgage defaults eased to 23.6 per cent from 43.3 per cent.

The BoE information provides to rising proof that the property market is enhancing as mortgage charges have fallen from their summer time peaks on the again of falling rate of interest expectations, on which fastened offers are primarily based.

In December, property brokers anticipated home sales to increase within the yr forward, based on separate figures printed on Thursday by the Royal Establishment of Chartered Surveyors, an expert physique.

Mortgage approvals hit a six-month excessive in November, based on BoE information printed this month, whereas Nationwide’s home value index elevated in November and December.

On Wednesday, the Workplace for Nationwide Statistics mentioned home costs had fallen on the quickest tempo in additional than a decade within the yr to November 2023, however its figures are primarily based on transactions agreed many months earlier.

“The entire information suggests a restoration within the housing market in 2024,” mentioned Tomasz Wieladek, chief European economist at funding firm T Rowe Worth. He added that households had extra scope to make mortgage funds since wages have been rising sooner than the speed of inflation.

The advance within the housing market may additionally enhance output in building, spending on housing-related items and providers and family confidence, serving to the broader financial system.

The BoE’s credit score situations survey was carried out between November 20 and December 8, when monetary markets have been nonetheless anticipating the central financial institution to chop its benchmark fee lower than they count on at current.

Tomer Aboody, director of property lender MT Finance, mentioned excessive inflation and rates of interest had weighed on the property market final yr, however “higher sentiment is anticipated with encouraging prospects for the yr forward”.