Bank of England: Jump in second quarter mortgage demand as strong third quarter expected

Mortgage applications jumped significantly in the second quarter of 2015 after three quarters of decline, a survey by the Bank of England shows.

It said that its Credit Condition surveys showed a surge in demand and it said it is expecting a solid third quarter, while supply had increased slightly in the second quarter.

The surging house prices and stricter rules for mortgage approvals had weighed down mortgage lending in the past but the bank's forecast for the demand was positive.

Howard Archer, chief economist at IHS Global Insight said: "The ... survey for the second quarter points to broadly healthy economic activity, with increased demand for credit from small businesses, higher demand for mortgages and relatively elevated demand for unsecured consumer credit."

The default rate on mortgages, credit card lending and corporate lending fell as well, which was encouraging, according to Archer. He said: "This is clearly a reflection of recent sustained healthy UK growth as well as the help to consumer finances coming from negligible inflation, rising earnings growth and higher employment. Low interest rates are also clearly a help."

Economists expect the demand for mortgages to increase in the second half of 2015, although the ongoing issue of climbing house prices compared to wages might put a strain on the market.

The increase in demand for lending from small and large businesses grew significant in the quarter, although the demand from medium businesses remained unchanged. The bank announced it expects a pick-up in demand from all businesses in the third quarter.