The default rate on secured loans to households posted a net balance of 43.3 in the three months to the end of August, up from 30.9 in the previous quarter, in the BoE’s questionnaire of lenders in its latest Credit Conditions Survey. 

It adds that customer demand for secured lending for house purchases in the third quarter slumped to a balance of -54.9, from 52.7 in the previous three months. Banks expect demand to fall further in the final quarter of the year. 

While demand for secured lending for remortgages also tumbled to a balance of -22.8, from 51.3 in the period. 

Lenders also point out that the proportion of household loan applications they approved slid to a balance of -30.2, from 14.9 in the period. 

Knight Frank Finance partner Hina Bhudia says: “Demand for mortgages is set to decline over the coming three months. Transaction activity in the property market is slowing and many borrowers are still rolling off sub-2% deals and are eager to put off refinancing where they are able to do so.

She adds: “Borrowers that do act are generally opting for trackers. For many people, the risk that monthly payments increase in the event of another interest rate hike is worth taking if it gives them the opportunity to see cuts in their monthly outgoings next year.  

“Typical two-year trackers at 75% loan to value are still above 5.50%, while retail bank tracker products sit a little over 1% above the base rate.”