Buy-to-let lending is also forecast to soften. Having already recorded a slightly negative score of negative 1.3% in the second quarter, buy-to-let demand is expected to weaken further to negative 31.7% in the third quarter.
Chart: Demand for secured lending for house purchases and remortgaging
Net percentage balances, Bank of England Credit Conditions Survey
■ Reported (quarter) ● Expected next quarter
Source: Bank of England
Despite the anticipated fall in demand, lenders expect mortgage availability to improve in the third quarter, having held steady in the previous three months.
Availability for borrowers with loan-to-value ratios of 75% or below fell in the second quarter but is expected to recover in the third. Availability for higher LTV borrowers remained stable in the second quarter and is expected to stay unchanged in the following period.
Lenders also indicated a greater willingness in the second quarter to lend to borrowers with less than 10% equity in their property, though this appetite may ease in the third quarter. Maximum loan-to-value limits improved in the second quarter and are expected to hold steady, while maximum loan-to-income ratios are forecast to improve further.
On arrears, the survey found default rates on mortgages held steady in the second quarter and are expected to remain unchanged in the third. Losses incurred on defaulted loans increased over the quarter but are also expected to stay flat in the near term. Spreads on mortgage lending, measured against the bank rate or relevant swap rate, widened in the second quarter, indicating higher pricing, though lenders expect this to narrow in the third quarter.