Mortgage demand from home buyers is expected to soften over the summer, according to a Bank of England survey of lenders.
Lenders reported that demand for mortgages for house purchase had increased in the past few months.
But demand is expected to decrease over the three months to the end of August.
Re-mortgaging demand also increased in the past few months and was expected to increase in the next few months.
The Bank of England’s Credit Conditions Survey is carried out each quarter, as part of its role in maintaining financial stability.
The report reflects the overall views of the banks and building societies surveyed, and does not necessarily reflect the Bank of England’s own views.
Lenders were surveyed between May 27 and June 13 for the latest report.
They were asked to report changes in the three months to the end of May, relative to the period between December and February, and expected changes in the three months to August.
Any impact from more recent developments is not captured in the survey.
Home buying costs became more expensive for some buyers from April, as stamp duty discounts became less generous. Stamp duty applies in England and Northern Ireland.
Recent HM Revenue and Customs (HMRC) figures have shown that house sales picked up in May, following a plunge in April as the stamp duty holiday ended.
Lenders were surveyed between May 27 and June 13 for the latest report (Lauren Hurley/PA)
HMRC’s report said sales were likely brought forward into March to take advantage of the higher stamp duty thresholds.
Simon Gammon, managing partner, Knight Frank Finance, said: “Lenders expect demand for home purchase mortgages to soften through the summer – a seasonal trend, but also a reflection of where mortgage rates were when the survey was taken in late May and early June.
“At that point, the best fixed-rate pricing had plateaued just below 4%, and with swap rates edging higher due to hotter-than-expected inflation data, there appeared little scope for further easing.
“That picture has shifted. We’re now seeing signs of a weakening labour market, and the Bank of England’s tone has changed – there’s more focus on downside risks to growth than inflation.”
He said that had helped to drive mortgage rate cuts by major lenders over the past 10 days “often by as much as 0.2 percentage points”.
Mr Gammon added: “While further reductions will be marginal, this could support mortgage activity over the summer and tee up a much busier autumn.
“The remortgaging market remains more robust.”
The Bank of England report also said that mortgage availability is expected to increase over the three months to end of August.
The availability of non-mortgage credit to households is also expected to increase.
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