The Bank of England’s latest Credit Conditions Survey shows that lenders reported a fall in demand for secured lending for house purchase in Q3, but are predicting this to increase heading into Q4.
Likewise, demand for secured lending for remortgaging fell in Q3, and was expected to rise in Q4.
In addition, lenders say the availability of secured credit decreased in Q3 but is expected to increase slightly over the next three months.
Lenders reported that default rates on secured lending fell slightly in Q3, and were expected to be unchanged in Q4.
Nathan Emerson, CEO at Propertymark, commented: “It is encouraging to see growing confidence around the potential demand for secured lending for house purchases and remortgaging in the months ahead. While the year has proved challenging for many consumers from an affordability perspective, improved access to finance could provide an important catalyst for greater confidence across the housing sector as we approach the end of the year and head into 2027.
“Maintaining access to affordable lending will be important in helping the market build momentum and providing greater certainty for consumers.
“With the Autumn Budget just weeks away, attention will focus on whether the UK government introduces measures that provide greater certainty for buyers and sellers. Support for first-time buyers would be particularly welcome, while measures that encourage investment in housing could help ensure greater economic confidence over the longer term.”
Karim Haji, global and UK head of financial services at KPMG, commented: “A cooling in mortgage demand suggests affordability pressures and economic uncertainty continue to temper appetite among prospective buyers, despite a more competitive mortgage market.
“The picture on unsecured borrowing is more finely balanced. Steady demand and rising unsecured defaults suggest that some households are continuing to lean on credit while simultaneously finding it harder to manage existing debts. That divergence is an important indicator of where financial pressure is most acute.
“A dip in mortgage defaults offers some reassurance that most borrowers are continuing to absorb higher housing costs, but rising unsecured defaults underline the financial strain still facing more vulnerable households.
“Looking ahead, Q4 could bring renewed financial pressure on households, with higher energy bills and inflation coinciding with the seasonal increase in spending in the run-up to Christmas. Higher borrowing costs will also add another headwind for consumers. Lenders need to be thinking now about how these pressures could affect households later in the year.”
Richard Pinch, senior director of banking and credit advisory at Broadstone, added: “The latest Credit Conditions Survey suggests the summer months saw a downturn in consumer demand for major borrowing, with demand for secured lending for house purchase falling in the third quarter.
“After a period of improving confidence earlier in the year, renewed uncertainty over the domestic political and economic outlook, alongside the resurgence of tensions in the Middle East, appears to have weighed on household spending and financial decisions over the summer.
“While lenders are expecting demand for mortgage and remortgage lending to pick up in the final quarter, there are reasons to question how quickly that recovery will come through. With the Autumn Budget looming and Bank of England interest rate hikes potentially on the horizon, households may remain cautious about making major financial commitments.
“The latest RICS survey points to pressure in the housing market already building as we enter the final quarter, with buyer enquiries, agreed sales and house prices all falling in September as higher borrowing costs and economic uncertainty weigh on demand.
“For lenders, understanding individual affordability will remain key in this uncertain environment. A more nuanced assessment of borrowers’ financial circumstances will be essential to ensure consumers can access credit where appropriate, while avoiding commitments that may become difficult to manage if household finances come under further pressure.”
