Mortgage demand and supply - Bank of England report

ended 14. April 2021

On Thursday morning @ 09:30, the Bank of England published its latest Credit Conditions Survey for Q1 2021. Key figures on the mortgages front were:

  • Lenders said demand for mortgages and remortgages decreased in the three months to the end of February 2021, but expected it to increase in the three months to the end of May.

Key takeaway: Lenders clearly believed the demand for mortgages decreased because many would-be borrowers felt they had missed out on the Stamp Duty holiday and so didn't seek to apply for a mortgage. But lenders expect demand to pick up as the economy reopens and people increasingly “come out of hibernation”.

  • Lenders reported that the availability of mortgages increased in the three months to the end of February. Lenders also expected the availability of mortgages to increase over the three months to the end of May.

Key takeaway: Lenders have become a lot more bullish in recent months, especially at higher loan-to-values, which is a boost for the property market and good news for first-time buyers. Lenders also expect to be more proactive in the months ahead.

A selection of views from Newspage experts are below.

6 responses from the Newspage community

"The worm has turned in the mortgage market and getting offers through for clients has definitely got easier. "Rates at higher loan to values seem to be creeping down and several lenders have totally jumped the gun on the Government guarantee scheme and are now offering 95% deals of their own volition. "Lower rates can only be good news for the monthly budgets of already stretched first time buyers. The barrier to entry also seems to be lower with more vanilla lenders appearing willing to take a leap of faith for borrowers with mild historic adverse. "A number of high street lenders are still treating some groups, such as the self-employed, like second class citizens and asking for the kitchen sink when it comes to documentation. That's if they'll even take the case on at all. "Demand for mortgages went through the roof in the first quarter, especially for first time buyers and people chasing a bigger garden to entertain in but the supply of new stock is a bottleneck. "We can't recall a time when we've had more potential clients fully prepped and out there looking for properties and a disorganised potential buyer is likely to miss out to someone else who has taken the time to get their ducks in a row already and is therefore in a more proceedable position."
"The housing market maintained its momentum in the first quarter, turbocharged by the extension of the Stamp Duty holiday in early March and more lenders returning to 95% lending. "Lending criteria remain an issue, with many lenders still extremely cautious, especially when it comes to borrowers on furloughed income or the self-employed. "Hopefully, the second quarter will retain its momentum as the demand for property remains high, with more and more buyers coming out of hibernation to find their next property. The one issue, as ever, is a lack of supply. "Demand for remortgages remains strong with rates remaining at historic low levels. If the purchase market does tighten, brokers will inevitably focus their attention on their back-books, if they are not doing so already."
"The first quarter of the year saw continued demand among borrowers, albeit reduced slightly compared to the final three months of 2020 due to uncertainty around what would happen to the stamp duty holiday. People had long suspected that it would be either extended or amended and thankfully both happened and this caused an uptick in demand in March. "We’ve seen more lenders keen to get money into the market in the first quarter of the year compared to the final three months of 2020, most notably with the return of higher loan-to-value mortgages across the board. "This in turn has increased demand, specifically from first time buyers, who we all know are the life blood of the property market. "More lenders have returned to higher loan-to-value loans in the first quarter, and we have also seen the pricing of fixed rates begin to improve, again most notably at higher loan-to-values where lender competition is growing. "However we are not back to pre-pandemic rates and I suspect we won’t be for quite a while, if at all. "Demand for mortgages is continuing to increase and we are easily in one of the strongest sellers markets for a long time, pushed on by the availability of new mortgage credit and the Stamp Duty extension. "It’s likely that during the next three months we will see a continued increase in demand from first time buyers as more lenders return to the higher LTV products. However I suspect there will be some softening in London and the South East, as the prospect of completing by June 30th is now becoming less likely for home-movers and the resumption of Stamp Duty over 250k is likely to have an impact. That said, overall demand is likely to continue, partly due to a bounce-back effect as the unlocking of our economy continues, thanks to every jab of vaccine administered. "The one thing we do need to address however, is the structural problem of housing availability. While it’s great that the housing market continues to rebound and house prices are on the rise (which is great if you already own an asset, not so much if you’re trying to buy one) we should be mindful that successive governments on both sides of the chamber have failed to address the issue of building enough good quality homes for our population. "Until that issue is properly fixed by way of planning law changes and skills training to increase the number of tradespeople that we need to build the homes for the future, it’s likely that demand will outstrip supply and prices will continue to rise."
"In the previous survey, lenders expected demand in the first quarter to decrease slightly for purchases, so I imagine the first three months of the year have provided a bit of a shock to them as demand has gone through the roof. "We have seen an increase of 115% in new enquiries and an increase of 125% in applications compared to the fourth quarter of 2020, of which the majority are new purchases. "Demand is exceptionally high and I expect it to remain this way throughout 2021, despite the phasing out of the Stamp Duty holiday. "Demand is likely to rise further, as we haven't hit the busiest months of the year yet when the weather warms up, and there are now far more mortgages available at 95% loan-to-value."
"So far this year, demand for mortgages has continued to increase. In the months ahead, we also expect to see the supply of mortgages increase, as more 95% loan-to-value mortgages return to the market. This week alone, both the Skipton Building Society and Digital Mortgages have announced 95% loan-to-value products. "Moving forward, demand is likely to stay high due to the Stamp Duty holiday and because this time of year generally is often a busy period. The pricing of mortgages is extremely competitive, with some 2-year fixed rates at 60% loan-to-value as low as 1.06%. "
"Demand remains strong, predominantly due to the extended Stamp Duty holiday. We have even seen some properties going to sealed bids, which is generally a sign of a strong property market. "I would expect supply and demand to continue to stay strong during the next few months. The roadmap out of lockdown and the successful vaccination programme appear to have had a significant impact. "The fact that some lenders have reintroduced mortgages at 95% loan-to-value shows there is more confidence in the property market compared to last year."