Mortgage demand fell in Q4 2011, say lenders

Consumer demand for mortgages fell in Q4 2011, according to lenders.

The Bank of England’s latest Credit Conditions Survey shows that demand for loans for house purchase declined in the three months to December, which lenders put down to the inability of many prospective buyers to put down a large enough deposit, as well as increased economic uncertainty.

And while demand for buy-to-let lending was reported to have picked up in Q4 2011, lenders expect demand for both prime and buy-to-let lending to fall slightly in the coming quarter.

Overall, lenders reported that the availability of secured credit to households was broadly unchanged in Q4 2011, failing to meet expectations of a slight increase from the previous survey.

Lenders said that tighter wholesale funding conditions and expectations for house prices had a negative impact on availability of credit, but an increase in risk appetite had a positive effect.

Availability of secured credit is expected to increase slightly in Q1 2012, with many lenders discussing plans to increase their focus on high LTV lending and more innovative products, such as high LTV mortgages that take collateral from house builders to mitigate risk.

In addition, lenders reported that the default rate on secured loans fell in Q4 2011 and is expected to fall further in the coming quarter.