Mortgage providers expect to make more loans in the next three months, according to a Bank of England survey, offering a ray of hope to the struggling housing market.
Lenders were at their most positive in two years about the prospects for mortgage availability, which they put down to their market share targets and the improving cost and availability of their funds.
Those polled in the central bank’s quarterly survey were also more willing to lend to those with a small deposit, reporting that they have increased access to loans for buyers with deposits of less than 25pc.
Meanwhile, Nationwide reported the average house price rose for a second month in March, up 0.5pc month-on month to £164,751.
However, the picture was marred by the Bank’s survey revealing an “unexpected” jump in the number of households defaulting – the first rise reported in almost two years. Lenders expected the default rate to climb, amid “concerns” over the impact of possible higher interest rates, which would push up mortgage repayments for many.
A “pick up” in remortgaging was because of households trying to shelter themselves from an expected increase in interest rates, lenders suggested. Aside from remortgaging deals, lenders saw a “marked decline” in demand for loans to make house purchases.
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Lenders also thought house prices would fall this quarter, but only a small balance thought mortgage demand would drop further.
“The unexpected increase in default rates on secured lending in the first quarter may temper their enthusiasm for lending more,” said Vicky Redwood, senior UK economist at Capital Economics. “And even if they are willing to lend more, [the] survey showed households’ demand for secured lending for house purchases fell sharply again.”
David Miles, a Bank of England policymaker, said Britons are undergoing a “painful transition” from a world in which the cost and availability of mortgages could not last to “something more sustainable”. He added: “It probably never made sense for there to be 100pc mortgages.”
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