Lenders reported that demand for secured lending for house purchase increased in Q2 and was expected to be unchanged in Q3. This is according to the latest Bank of England Q2 Credit Conditions Survey.

The survey also showed that demand for secured lending for remortgaging decreased in Q2 and was expected to increase slightly in Q3 (Chart 3).

Lenders reported that overall spreads on secured lending to households – relative to Bank Rate or the appropriate swap rate – widened in Q2, and were expected to widen slightly in Q3.

On the supply side, lenders reported that the availability of secured credit to households was unchanged in the three months to end-May 2024 (Q2). It was expected to increase slightly over the next three months to end-August 2024 (Q3).

KPMG global and UK head of financial services Karim Haji commented:“These latest figures present a complex picture of the current lending landscape. With inflation having finally dropped to the Bank of England’s 2% target, we’ve seen demand for lending increase across the board. The falls in inflation, combined with positive wage growth in the past year, are starting to alleviate cost of living pressures on households and unlock more spending power.

“Yet interest rates remain high, and despite expected cuts are unlikely to return to the levels seen when the hiking cycle began. The cost of borrowing remains a major burden on those who have made use of lending facilities since the 2022 mini-budget or will be thinking of doing so in the coming months.”

He added: “As more and more households’ mortgages come up for renewal, it follows that with significant jumps in monthly repayments the number of defaults could rise. Given the improving economic outlook, any upward momentum in defaults should be short lived, although lenders should remain vigilant.”