The quarterly survey of bank and building society lenders found that the fall in demand was significant in prime lending, where the net percentage balance was the lowest since 2008 Q3.
Some lenders attributed the reduction in secured lending demand over recent quarters to a combination of changes in regulatory policy; concerns about housing affordability; and uncertainty about the outlook for the housing market.
However demand for secured lending for house purchase, and particularly prime lending, is expected to increase in Q2. Similarly, demand for secured lending for remortgaging also fell significantly in Q1, but was expected to increase slightly in Q2.
For the tenth successive quarter, spreads on secured lending rates to households — relative to Bank Rate or the relevant swap rate — narrowed in Q1. The narrowing in spreads in Q1 came at the same time as a fall in banks’ internal transfer prices. Fees charged on secured lending also fell in Q1. Lenders expected a further significant narrowing in mortgage spreads and a further slight reduction in fees over the next three months.
