UK mortgage demand bounces back to growth

UK mortgage lenders saw a resurgence in demand during the first quarter of 2024, according to the latest official data from the Bank of England, indicating a stabilizing property market.

The index tracking the proportion of lenders reporting an increase in demand for home loans versus those reporting a decrease climbed to 35.9 in the first quarter, a significant turnaround from the previous quarter’s negative reading of minus 31.6. This marks only the second positive reading in seven quarters, with the last positive reading recorded in the second quarter of 2023.

Similarly, the Bank of England’s measure tracking demand expectations for the next three months reached 23.2, the highest level in a year, while demand for remortgages hit a two-year high.

These findings align with a recent recovery in the mortgage market following a lackluster performance last year, as lenders have trimmed borrowing costs from their peak levels.

Simon Gammon, managing partner at Knight Frank Finance, noted that demand for mortgages to purchase homes has been on the rise since the beginning of the year, with momentum expected to continue building into the summer. Despite a slight setback in sentiment at the start of the year due to an unexpected increase in inflation, the housing market recovery remains on track.

The Bank of England’s lenders’ survey, conducted between late February and mid-March, also revealed an improvement in secured credit availability to households at the start of the year, with the index rising to 18.4 from 10.4 in the previous quarter. Lenders anticipate further improvement in availability in the second quarter of 2024.

While the survey found an increase in mortgage defaults and expectations of further rises in the second quarter, economists remain optimistic about the overall economic recovery, expecting defaults to decrease in the near term.

Despite some volatility in recent property market data, including an unexpected drop in house prices in March, indicators such as rising mortgage approvals and increased optimism among estate agents point towards a continued recovery in the housing market.