Demand for mortgages falls
It is hard to read how the economy will fare this year, but one aspect seems certain: household consumption is going to be restrained and people are going to be very cautious about house buying. Today’s Credit Conditions Survey from the Bank of England confirms this, showing demand for mortgages falling “markedly” at the end of the year. The lenders responding to the survey also reported that they expect demand to fall in the first three months of next year.
In line with other reports, the survey showed that consumer credit other than credit cards fell whilst credit cards themselves stayed steady – suggesting people using their cards in the run up to Christmas but trying not to run up other debts.
The survey began in 2007, which means that the historical figures allow us to put these results in the context of what has happened since before the recession. The charts below show the results for what lenders have said about the previous 3 months and then the forthcoming 3 months:
We had a boom in demand for mortgages that preceded the economic recovery, since then it has been in decline. Today’s figures are not as bad as the depths of the recession, but they are very depressed. If you compare the Q4 position in the first chart with the Q3 position in the second you can see that one reason why expectations are so depressed may be that lenders were expecting demand to be higher in the last quarter of 2010, and it is possible that they have gone to the other extreme now.
The Bank says that this shift reflected
a recent fall in house prices, a general weakening of sentiment towards the housing market and uncertainty over the economic outlook associated with the impact of the Government’s Comprehensive Spending Review.