LONDON (Reuters) - British lenders think a slowdown in house prices will exert the biggest drag since 2012 on how many mortgages they offer, a Bank of England survey showed on Thursday, as Brexit uncertainty continues to depress the market.
Lenders surveyed by the central bank last month expected to provide around as many mortgages in the second quarter as in the first three months of the year.
But they predicted that expectations for house prices would be the biggest drag on mortgage supply, rather than the economic outlook or financial conditions.
Expectations for demand for mortgages in the prime market -- dominated by London which has been hardest hit by the chaos surrounding Britain's exit from the European Union -- fell to their lowest level since late 2010, the BoE said.
Other surveys have shown Brexit to be a major drag on the property market in the capital, which is sensitive to flows of migrant workers from the European Union. A surge in prices in London in previous years has also stretched affordability.
Official data on Wednesday showed British house prices rose at the weakest rate in six-and-a-half years in February, dragged down by London's biggest price fall in a decade.
The BoE's survey took place between March 4 and 22.