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UK lenders' expectations for mortgage demand rose sharply at the end of last year, according to official data published on Thursday, as lower borrowing rates fueled a recovery in the property sector.
The expected mortgage demand index for home purchases rose to 21.9 percent in the last three months of last year from minus 28.4 percent in the third quarter, according to the Bank of England's quarterly survey of banks and building societies.
The index tracks the proportion of lenders who expect an increase in demand over the next three months minus lenders who expect a decrease.
Although the mortgage lending demand index in the fourth quarter was still negative at minus 31.6 percent, it rose sharply from minus 54.9 percent recorded in the previous three months.
During the same period, the net percentage of lenders reporting higher mortgage delinquencies fell to 23.6 percent from 43.3 percent.
The Bank of England data adds to growing evidence that the property market is improving, with mortgage rates falling from their summer peak on the back of lower interest rate expectations, on which fixed deals are based.
In December, estate agents expected home sales to expand next year, according to separate figures published on Thursday by the Royal Institution of Chartered Surveyors, a professional body.
Mortgage approvals hit a six-month high in November, according to Bank of England data published this month, while the national house price index rose in November and December.
The Office for National Statistics said on Wednesday that house prices fell at the fastest pace in more than a decade in the year to November 2023, but its figures were based on transactions agreed several months earlier.
“All the data points to a recovery in the housing market in 2024,” said Thomas Willadek, chief European economist at investment firm T. Rowe Price. He added that families have more room to make their mortgage payments because wages are rising faster than the rate of inflation.
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An improvement in the housing market could also boost production in the construction sector, spending on housing-related goods and services and household confidence, helping the broader economy.
The Bank of England's credit conditions survey was conducted between 20 November and 8 December, when financial markets were still expecting the central bank to cut its benchmark interest rate less than it currently expects.
Tomer Aboudi, director of MT Finance Mortgage Bank, said that high inflation and interest rates affected the real estate market last year, but “sentiment is expected to improve with encouraging prospects for next year.”
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