UK banks boost mortgage supply at fastest pace since 2021

UK LENDERS boosted the supply of mortgages by the most since 2021 as more affordable borrowing costs encourage buyers back to the property market.

The Bank of England’s credit conditions survey published on Thursday (Apr 11) showed that lenders increased the availability of home loans in the first quarter after a rise in demand from borrowers.

It was the biggest pick-up in over two years when the central bank was starting its rapid interest rate-hiking cycle. Banks expect a further increase in mortgage supply in the coming months.

The figures add to evidence that a bounce-back in the housing market may have further to run, after a recent pick-up in interest from potential buyers and a rise in mortgage approvals to a 17-month high. It came as property surveyors reported they are the most optimistic they’ve been in over a year about new buyer demand.

Borrowers are responding to a fall in mortgage rates from the 15-year high hit last summer and a fading cost-of-living crisis that is brightening the economic outlook.

While mortgage rates are down on last year’s highs, they have been creeping up in recent months, threatening to put a dampener on the recovery. Traders have scaled back expectations for BOE rate cuts, now seeing less than two this year.

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“Demand for mortgages to buy homes has been rising since the new year and momentum will continue to build into the summer,” said Simon Gammon, managing partner at Knight Frank Finance.

“Mortgage rates are now holding steady and whether they fall further will hinge on inflation continuing to ease.”

The BOE’s quarterly survey showed that demand for mortgages and unsecured borrowing, such as credit cards, rose in the first quarter with a further increase expected in the next three months. However, default rates on both also climbed and are expected to rise again as some borrowers refinance their mortgage deals at higher costs.

“The easing in credit conditions for secured lending is supporting the economic recovery, which may lead to stronger growth than the [BOE’s] Monetary Policy Committee expects,” said Tomasz Wieladek, chief European economist at T Rowe Price.

“The MPC will likely be concerned about risks that the current recovery, driven by easier credit conditions, could push demand above supply and hence contribute to further inflation in two years time.” BLOOMBERG