UK lenders are expecting the biggest fall in mortgage demand since the second quarter of 2020

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A general view shows the Bank of England and the Royal Exchange Building in London, Britain December 17, 2020. REUTERS/Hannah McKay

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LONDON, July 14 (Reuters) – UK lenders are expecting the biggest fall in demand for mortgages since mid-2020 in the three months to the end of August, another sign the property market is cooling amid rising inflation.

The Bank of England’s quarterly survey of credit conditions showed that the net balance of lenders’ expectations for mortgage demand fell to -41.9. Expectations were last lower in Q2 2021 and weaker actual demand was last seen in Q2 2020.

Thursday’s BoE survey, conducted between May 30 and June 17, agrees with sentiment from members of the Royal Institution of Chartered Surveyors, who said house prices in June were slowing at the slowest pace since March 2021 have risen. read more

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Since February 2020, UK house prices have risen by more than 20%, helped by more working from home, low mortgage rates and higher disposable income from wealthier households – trends that are now all reversing.

The BoE survey found that mortgage lenders are expected to increase the additional interest margin they charge above their own funding costs the most since the end of 2020.

Lenders also expected more mortgage defaults — although their earlier forecasts for this have generally not materialized.

For unsecured loans, banks expected demand to remain stable while planning to moderate supply slightly as they approve fewer loans and credit cards due to borrowers’ weaker financial condition.

Corporate loans were expected to remain broadly unchanged.

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Reporting by David Milliken Editing by William Schomberg

Our standards: The Thomson Reuters Trust Principles.

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