A key survey from the Bank of England indicates that mortgage availability is expected to increase slightly over the three months leading to the end of February 2026. This comes as several major lenders, including HSBC UK and Nationwide, have announced cuts to their mortgage rates in recent weeks, injecting fresh momentum into the housing market.
Credit Conditions Survey: A Mixed Picture for Households
The Bank's quarterly Credit Conditions Survey, which polls banks and building societies, provides a snapshot of the lending landscape. The latest survey was conducted between 10 November and 3 December 2025.
Lenders reported that mortgage availability to households had already increased in the three months to the end of November 2025. However, demand for mortgages from home buyers fell in the final quarter of last year and is expected to dip again in the first quarter of 2026.
In a contrasting trend, demand for remortgaging was unchanged in late 2025 but is anticipated to rise in early 2026. Furthermore, default rates on home loans fell in the final months of 2025 and are also predicted to decrease in the coming months.
Unsecured Borrowing Points to Consumer Strain
The survey highlighted growing pressure on household finances through other forms of credit. Demand for credit card borrowing increased in the final months of 2025, while defaults on credit cards rose and are expected to climb further in early 2026.
Karim Haji, global and UK head of financial services at KPMG, commented on the findings. He said the rise in unsecured lending and softer mortgage demand "both point to the affordability pressures and uncertainty that continue to weigh on households." He added that the increase in short-term borrowing had fed through to higher defaults, "highlighting the growing financial stress many consumers are facing."
For businesses, lending appetite remained stable. Corporate loan demand from small, medium, and large firms was unchanged in late 2025 and is expected to stay flat in early 2026. Default rates on business loans saw a slight increase for small companies but were steady for medium and large enterprises.
Rate Cuts Fuel Market Optimism Post-Budget
The survey's somewhat cautious outlook on mortgage demand may already be shifting. Experts suggest the data captured the peak of uncertainty around the government's budget. Since then, a series of mortgage rate cuts from major lenders has altered the landscape.
Mark Harris, chief executive of mortgage broker SPF Private Clients, advised borrowers to shop around. "With lenders reducing their rates in recent days and weeks, shopping around... is a sensible approach," he said.
Simon Gammon, managing partner at Knight Frank Finance, noted that lenders had feared budget-induced volatility, which did not materialise. "Instead, most of the major lenders cut mortgage rates during the first fortnight of January, which is fuelling momentum. We expect activity to keep picking up," he stated.
This optimism is echoed in other market indicators. The Royal Institution of Chartered Surveyors (Rics) reported on Thursday that property professionals are growing more positive about sales and price expectations.
Rob Wood, chief UK economist at Pantheon Macroeconomics, observed: "This morning’s Rics survey suggests that the housing market rebounded after the budget, so the Credit Conditions Survey is likely too pessimistic."
The Bank of England conducts this survey to understand trends in credit conditions as part of its role in maintaining financial stability. It is important to note that lenders' views in the survey do not necessarily reflect the Bank's own official position on credit conditions.
