BoE: Demand for secured lending for remortgages rises

Michael Lloyd

January 16, 2020

Demand for secured lending in remortgaging rose in Q4, the Bank of England’s Credit Conditions survey has found.

Meanwhile, lenders reported that demand for secured lending for house purchase decreased in Q4 and was expected to decrease in Q1.

Andrew Montlake, managing director of Coreco, said: “It’s no surprise lenders said the availability of secured credit to households rose in the fourth quarter.

“The mortgage lending market was awash with cash trying to find a home.

“Market share objectives’ can be translated as major high street lenders competing like crazy to get the business of prime borrowers.

“It’s hard to understand why lenders are expecting supply to decrease in the three months to the end of February.

“From what we’re seeing, they’re as hungry as ever to get money into the market and have become even more bullish following the General Election result.

“If mortgage demand did decrease slightly in the fourth quarter, it was almost certainly due to the General Election and broader political chaos of the Autumn.

“It’s curious that lenders are expecting mortgage demand to drop off in the first quarter.

“We are already seeing an uplift in demand and transactions on the back of improved sentiment following the General Election.

“Nobody is expecting transaction levels to suddenly go through the roof, as there is still a lot of uncertainty as to how Brexit pans out, but demand has definitely improved in January and the signs are that this will continue.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, added: “It is no surprise that mortgages were more readily available in the final quarter of last year.

“Lenders had one eye on year-end targets and you would traditionally expect to see a push for business at this time.

“With transaction levels subdued as would-be buyers and sellers prevaricated over making decisions with Brexit looming large in the background, the need to do more lending was ever more apparent.

“Lenders reported that demand from borrowers fell in the final quarter, a trend expected to continue into this quarter.

“This may be to do with the uncertainty that continues around the Brexit negotiations but on the ground we’ve seen more positivity since the General Election.

“Demand for remortgaging increased in the final quarter with borrowers taking advantage of cheap 5-year fixed-rate mortgages in particular as a hedge against all the uncertainty.

“Lenders’ margins have inevitably tightened as they have continued to compete on rate to bring in business.

“This trend is expected to continue into this quarter, which is great news for borrowers. Barclays, Halifax and Skipton Building Society have already reduced rates this year, a trend likely to be followed by other lenders.

“Thankfully, default rates dropped a little and are expected to continue to do so.

“This is likely to be down to cheap interest rates and forbearance shown by lenders.

“Tougher affordability criteria also mean borrowers are less likely to overstretch themselves in the first place when taking out a mortgage.”

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