UK banks plan sharp cut in mortgage lending

Bloomberg

British banks plan a sharp cut in mortgage lending over the next three months amid fears that borrowers will start to default on their debts.
The Bank of England’s (BOE) quarterly credit conditions survey showed lenders plan to reduce the supply of mortgages at the fastest rate since the start of pandemic in early 2020.
Excluding the Covid crisis, the rate of contraction expected was only steeper in one three-month period in 2014 and in immediate aftermath of 2008 financial crisis.
The BOE survey, which was conducted in the three weeks shortly after Russia’s invasion of Ukraine, provided no explanation for plans to tighten lending on property. Banks have warned that they expect defaults to rise in the coming three months.
Households are facing a tight cost of living squeeze just as interest rates are rising to tackle soaring inflation, which has hit a 30-year high of 7%. Higher interest rates make the mortgages more
expensive to service.
Despite plans to reduce the supply of lending, banks still expect demand for mortgages from households to increase in coming three months.
Mortgage lending has been fiercely competitive, with the margin made by banks on the products narrowing in the first quarter, the BOE survey also found.
While property lending is tightening, banks still plan to step up provision of unsecured debt like personal loans and credit card debt.
Both demand for and supply off unsecured credit have been increasing for the past year and are expected to continue to rise rapidly in the next three months.