A survey of banks by the Bank of England indicates an anticipated downturn in demand in the third quarter of 2026 across both mortgage, and remortgage products.
The latest Credit Conditions Survey covering Q2 2026 indicates lenders are bracing themselves for a fall in demand for secured lending for house purchases in Q3; despite a rise in demand in Q2 2026. The survey comes as governor of the Bank of England Andrew Baily told delegates at the European Central Bank forum in Sintra, Portugal, that rates cuts, which could stimulate property market activity, would be “off the table” at the moment. Bailey said while rates might have been expected to come down, the geopolitical tensions in the middle east had forced the BoE to “press pause” amid evidence of a weakening UK economy and labour market.
The BoE survey asked “how has demand for secured lending for house purchase from households changed?” with the response showing a significant swing from a positive 14.9 score, to -23.2; a larger swing than from Q1 (0.3) to Q2 (30)
The property market moves into the Summer months in a state of flux said Anthony Codling, Managing Director of Equity Research at RBC Capital Markets: “The latest Bank of England Credit Conditions survey paints a mixed picture, mortgage rates are expected to fall in Q3, but demand from homebuyers is expected to fall, not a helpful signal for UK housebuilders and UK house prices, but good news for those looking to buy…”
Nathan Emerson, CEO of Propertymark, added: “More stable levels of secured debt, such as mortgages, generally indicate there has been no sudden or harsh shift in consumer confidence. The figures lean towards demonstrating many households have weathered current Middle Eastern geopolitical tensions remarkably robustly, potentially helped by inflation seeing a recent dip and base rates not seeing any increases.
“Recent uncertainty within the global economy has added a degree of reservation regarding financial certainty for many people, and with some UK Government policy effectively being paused until there is clarity on the next Prime Minister, the next twelve months may prove essential to closely scrutinise.”
The survey provides insight into lender sentiment around wider credit and lending and showed overall demand for unsecured lending was unchanged in Q2 and was expected to be unchanged in Q3. Demand for credit card lending slightly decreased in Q2, and was expected to be unchanged in Q3. Demand for other unsecured lending was reported to have increased and was expected to decrease in Q3.
Damien Burke, Head of Regulatory Practice at banking & credit advisory consultancy Broadstone, commented: “The latest Credit Conditions Survey further demonstrates that while consumer confidence and the economic outlook were beginning to improve at the start of the year, the conflict in Iran has dampened that trajectory.
“Lenders reported growing demand in mortgage and remortgage lending but are now expecting to see that decline as we head into the summer months. It demonstrates how concerns around affordability, with increases expected in both the cost of living and the cost of borrowing, can significantly impact market confidence and real lives of consumers.
“The continued stability in unsecured lending demand demonstrates a more measured consumer backdrop, with households staying cautious about taking on additional debt as financial pressures remain front of mind.
“Lenders will be increasingly focused on gaining a wider understanding, therefore, of borrowers’ individual affordability so that they can continue to support demand in the market. This includes assessing affordability at the outset for both mortgage and consumer credit products, as well as through ongoing reviews.”
