Demand for mortgages from homebuyers in the UK dropped off in the last three months of 2021 and it is expected to continue to cool in the next three months, despite credit conditions for borrowers expected to remain loose, according to a survey released by the Bank of England (BoE).
Demand for remortgaging increased in November 2021 (Q4), and is expected to decrease slightly in Q1.
As a result of the end of the stamp duty holiday in England and Northern Ireland, there was a downward pattern in mortgage lending in the last quarter of 2021, as reported in the quarterly survey of credit conditions published by the Bank of England.
The purpose of the survey is to maintain monetary and financial stability, BoE aims to understand trends and developments in credit conditions. This quarterly survey of banks and building society lenders covers:
Secured and unsecured lending to households.
Lending to non-financial corporations, small businesses and to non-bank financial firms.
Mortgages across the UK are expected to become more widely available, as lenders anticipate an easing of conditions for some borrowers, providing the opportunity for more first-time homeowners to enter the market with smaller deposits. As per the survey, the number of lenders predicting credit conditions would loosen over the next three months outweighed those saying it would tighten by 15 per cent.
As a whole, house prices in the UK were up 9.8% in 2021, taking the average property price up to a record high of £276,091. House prices have increased by over £24,500 in 2021, the largest annual cash rise since 2003.
Last year, the housing market’s strong price growth was fuelled by the stamp duty holiday, and investors looking to purchase a second home in fear of missing out due to surging house prices. Whilst the forecast for 2022 is not as dominant as the growth experienced last year, as a result of the expected rise of mortgage rate and a shortage of supply as fewer homes are available for sales, the prospect of rising interest rates could provide the opportunity to tackle rising inflation.
If you would like to discuss the UK property market in more detail, please reach out to the team to organise a time to have a conversation about how Wealthi can help you build a successful property portfolio.
Chris Hynes is Wealthi’s Global Research Analyst, Based in London