UK mortgage lending is forecast to fall by an extra 5 per cent to £215bn subsequent 12 months earlier than recovering in 2025, in response to UK Finance.
Analysis by the commerce physique mentioned that “the outlook for 2024 is one among persevering with challenges within the mortgage market”, though the primary pressures on affordability seem like peaking for the time being.
2023 noticed a 28 per cent year-on-year fall in gross lending to £226bn, as increased rates of interest deterred would-be homebuyers and landlords.
Learn extra: Purchase-to-let arrears double as landlords really feel increased charges ache
Lending for home buy fell by 23 per cent year-on-year to £130bn, whereas new buy-to-let buy lending slumped by 53 per cent to £8bn.
UK Finance expects lending for home buy to fall by an extra eight per cent subsequent 12 months to £120bn, and buy-to-let buy lending to fall by an extra 13 per cent to £7bn.
“2023 was a difficult 12 months for each potential and present mortgage debtors, dealing with affordability pressures from increased rates of interest and the elevated cost-of-living, in addition to home costs nonetheless at elevated ranges relative to earnings,” mentioned James Tatch, head of analytics at UK Finance.
Learn extra: Particular person mortgage debt is lowest on file excluding pandemic
“Within the face of those challenges, borrowing for home buy has been constrained.
“With these pressures unlikely to ease considerably within the brief time period, we anticipate lending to stay weak in 2024, with a gradual enchancment in affordability mirrored in a modest enhance in exercise ranges in 2025.”
Mortgage arrears rose by 30 per cent this 12 months to 105,600, whereas possessions went up by 13 per cent to 4,400.
UK Finance is forecasting arrears to extend to 128,800 circumstances by the top of 2024 and possessions to extend to five,100. It expects arrears to rise extra modestly in 2025 to 137,800 circumstances, as stress on mortgage funds begins to recede.
Learn extra: Purchase-to-let arrears worsening at quicker fee than owner-occupied mortgages
“The difficult atmosphere has additionally pushed extra households into mortgage arrears,” mentioned Tatch. “Nevertheless, the rigorous affordability exams in place since 2014 are actually working to make sure that the overwhelming majority of consumers can nonetheless afford their mortgage funds even with the elevated stress on their funds. Though we forecast extra clients will encounter arrears subsequent 12 months, we anticipate numbers to peak properly under ranges seen beforehand.”
