Mortgage demand for purchases and remortgages fell in the first quarter of this year, just before the Budget took place on 3 March, the latest Bank of England credit conditions survey shows.
The net percentage balance for house purchase in Q1 2020 read -21.9 compared to 31.5 in the final quarter of last year, but when asked about demand in the next three months, lenders predicted a rise, amount to a net percentage balance of 42.8.
And for remortgaging demand, lenders gave a net percentage balance reading of -29.3 for Q1 2020 and 14.4 for how they see this doing in Q2.
Demand for buy-to-let lending is due for a rise too. Providing a net percentage balance of -9.4 for demand in the first quarter of 2021, the survey participants nevertheless gave a net percentage balance of 16.2 for the next three months.
Regarding supply, survey participants said that secured credit availability increased in the first quarter of this year. They collectively gave a net percentage balance figure of 13.7 for how things went in Q1 and 37.6 for how they see affairs in Q2.
The BoE survey also asks about loan pricing. Here, lenders said that overall spreads for secured lending to households narrowed in Q1, with a net balance of 20.6, and will likely narrow further in the second quarter – giving a net balance of 65.4.
Cambridgeshire Money director Corey Whelan says: “In the previous survey, lenders expected demand in the first quarter to decrease slightly for purchases, so I imagine the first three months of the year have provided a bit of a shock to them as demand has gone through the roof.
“We have seen an increase of 115 per cent in new enquiries and an increase of 125 per cent in applications compared to the fourth quarter of 2020, of which the majority are new purchases.
“Demand is exceptionally high and I expect it to remain this way throughout 2021, despite the phasing out of the Stamp Duty holiday. Demand is likely to rise further, as we haven’t hit the busiest months of the year yet when the weather warms up, and there are now far more mortgages available at 95 per cent LTV.”
Meanwhile, MT Finance director Tomer Aboody comments: “What this survey does give us is a good indication of what is to come when the government stimulus finally stops or reduces later in the year, as it must at some point.
“Demand for borrowing over the past year has been booming. Government assistance accounts for a lot of this artificial confidence and if the figures are any indication, a slowdown in the market will come – this state of affairs cannot continue forever.”
