The UK lenders intended to reduce providing secured credit to households in the three months to May, despite an expected increase in demand for mortgage lending, the survey results from the Bank of England showed on Thursday.
According to Credit Conditions Survey, lenders maintained the availability of secured credit to households in three months to February. However, they plan to reduce the secured credit in the second quarter.
The supply of unsecured credit to households increased in the first quarter and was expected to rise further in the quarter ahead.
The survey showed that the supply of credit to the corporate sector was unchanged in the first quarter and banks plan to retain its flow in the second quarter.
The credit conditions survey points to credit availability being restricted by higher market interest rates which will be priced into mortgage rates in the second quarter, Andrew Wishart and Pieter du Preez, economists at Capital Economics, said.
Despite other lending criteria remaining stable or even loosened somewhat, that should weigh on buyer demand and bring down house price growth sharply in the second half of the year, they said.
Further, demand for secured lending for house purchases rose slightly in the first quarter and it will rise again, lenders said.
Likewise, demand for unsecured lending is expected to rise in the second quarter as seen in the first quarter.
Lenders reported that overall demand for corporate lending from businesses of all sizes was unchanged in the first quarter but will increase in the second quarter.
As the survey was conducted between February 28 and March 18, any impact from the recent developments is not captured.