Lenders will make more credit available to homebuyers over the coming quarter, but are gloomy about demand in the sector, data from the latest Bank of England Credit Conditions Survey shows.
Institutions estimate the credit they will supply for secured loans will lift to a balance of 16.4 in the quarter to the end of February, from a zero balance in the previous three months.
But they expect demand for house purchases to slump to a balance of minus-10.6 from 34.1 in the same period.
This data runs counter to industry expectations that homebuying will spike in the run-up to April when stamp duty thresholds are cut.
In April, the current stamp duty threshold of £250,000 will halve to its previous level of £125,000, after Chancellor Rachel Reeves decided not to extend this temporary relief in her October Budget.
For first-time buyers, the stamp duty threshold falls to £300,000 from £425,000, while the maximum purchase price FTBs relief can be claimed on will fall to £500,000 from the current level of £625,000.
Lenders may be reacting to a run of gloomy economic news.
The UK economy returned to growth in November, driven by the service industry, albeit at a slightly slower rate than expected.
Gross domestic product rose by 0.1%, according to the Office for National Statistics, although economists had expected 0.2% growth. In October, gross domestic product fell by 0.1%.
Lenders also expect demand for remortgaging to plunge to a balance of munis-20.1 over the three months to February from 42.6 over the previous three months.
Knight Frank Finance managing partner Simon Gammon says: “Clearly, the lenders think that the beginning of 2025 will be another period of sluggish activity in the housing market. As things stand, this is likely to prove true.
“On Wednesday afternoon, two large lenders said they would increase the cost of some mortgage products – the first of the major lenders to do so since the latest round of bond market volatility.
“That will probably prompt others to follow, which will be disappointing for anybody seeking to purchase or remortgage a home in the months ahead.
“That said, fairly positive inflation data from both the UK and the US this week has calmed bond markets, which suggests we’ll see a swift repricing, rather than weeks of sustained increases in mortgage rates.”