Editor's note: This brief was summarised by The Property AI Newsroom from a report by Mortgage Solutions. Read the original article for full details.

Lenders Predict Drop in Mortgage Demand for Q3 Despite Q2 Growth

Lenders reported a rise in demand for mortgages for both purchase and remortgage in the second quarter of 2026, but forecast a decline for the third quarter, according to the Bank of England’s Credit Conditions Survey. The survey found that lenders expect activity to decrease across all mortgage sectors in the coming months.

The Bank of England’s survey showed that lenders gave a score of 14.9% for mortgage demand in Q2, but predicted a negative 23.2% for Q3. Prime lending demand was reported at 23.8% in Q2, with a forecast of negative 23.2% for the next quarter. Remortgaging demand reached 42.5% in Q2, but lenders expect this to contract, with a reading of negative 20.5% for Q3.

Buy-to-let mortgage demand was also highlighted, with a slightly negative reading of negative 1.3% in Q2, expected to worsen to negative 31.7% in Q3. Despite these forecasts, lenders anticipate that the overall availability of mortgages will improve in Q3 after remaining stable in Q2.

For borrowers with low loan to value (LTV) ratios of 75% or less, mortgage availability decreased in Q2 but is expected to improve in Q3. The availability for high LTV borrowers was stable in Q2 and is expected to remain unchanged in Q3. Lenders also indicated they were more willing to lend to borrowers with less than 10% equity in their homes during Q2, but may reduce this willingness in Q3.

The survey noted an improvement in maximum LTV limits in Q2, which are expected to remain flat in Q3, while maximum loan to income (LTI) ratios are predicted to improve. Default rates on mortgages were flat in Q2 and are expected to remain unchanged in Q3. Losses given on default loans rose during Q2 but are set to be unchanged in the near term.

Mortgage lending spreads relative to the bank rate or swap rate widened in Q2, indicating higher pricing, but lenders expect these spreads to narrow in Q3.

These findings may be relevant for UK letting agents and inventory clerks monitoring market activity, as changes in mortgage demand and availability can influence rental market dynamics and property turnover.