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Availability of mortgage finance expected to fall further

Christina Hoghton
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Christina Hoghton

Lenders expect a fall in mortgage availability, a drop in demand and an increase in mortgage defaults over the coming three months

Lenders have said that mortgage availability fell in the three months to the end of August.

And they expect the availability of mortgages (and other loans secured on property) to decrease further over the three months to the end of November 2022.

That’s according to the Bank of England’s latest Credit Conditions Survey of banks and building societies, which gauges trends and developments in credit conditions.

As well as expecting a fall in credit supply, lenders reported that demand for secured lending for house purchase fell in the third quarter of the year and is expected to fall further in the coming months.

However, demand for remortgaging increased in the last quarter and lenders think it will continue to rise.

Mortgage defaults rose in the three months to August and lenders expect the rate of defaults to rise further by the end of the year.

Myron Jobson, senior personal finance analyst at interactive investor, said: “Lenders expect defaults on mortgages, credit card and other loans to increase over the coming months as the cost-of-living squeeze becomes more acute. It is a worrying sign of finances being stretched and financial resilence being tested like never before among many of those relying on loans and plastic.

“Interestingly, the availability of loans is expected to dip which could suggest that lenders are tightening their belts amid the uncertainty in the money market at present.

“The new data supports findings from various house prices indices that demand for homebuying in the UK has tailed off and is set to cool as house prices remain stubbornly high and mortgage rates have risen to levels we haven’t seen since before the financial crisis – pricing many out of the property market. With the ongoing supply-demand mismatch in property propping up house prices, the immediate casualty of higher mortgage rates could be transactions rather than house prices.

“The fact remains that it feel like we are at the end of the golden age for cheap mortgages and with further interest rate rises seemingly around the corner, homeownership is set to become more costly for many of those on the property ladder and those reaching for the first rung.”