"Affordability remains a barrier to home ownership, but pressures should start to ease gradually through this year and next."
- Eric Leenders, managing director of pesonal finance at UK Finance
Affordability pressures led to a weak mortgage market in 2023, according to the latest UK Finance release. The same pressures are likely to hold back activity in 2024, although forward data suggests some recovery in the first quarter.
Over the whole of 2023, the increased cost of living, coupled with higher mortgage interest rates, led to a sharp fall in mortgage lending across all sectors.
The number of loans made to first-time buyers last year was the lowest since 2013, down 22.4% on 2022. But home movers were hit even harder, with loan numbers falling by 26%. The 251,000 loans to home movers last year was the lowest figure since 1974.
For households who bought a home last year, affordability pressures meant borrowers were choosing longer mortgage terms to lower the cost of monthly payments. By the end of 2023, almost one in five first-time buyers were borrowing with a term of over 35 years, compared with fewer than one in ten the year before.
However, more positively, the number of applications for mortgage loans rose in Q4 2023. With inflation pressures easing, and expectations of lower borrowing costs to follow, the rise in applications signals that the market could grow in early 2024.
Mortgage arrears and possessions
Mortgages in arrears rose throughout 2023 to 107,250, however, this number still accounts for less than 1% of the total number of outstanding mortgages. UK Finance expects arrears cases to increase in 2024, but not at the same pace as in 2023.
The number of possessions remained largely static during 2023, numbering 1,150 in Q4 and 4,620 in 2023 as a whole. UK Finance noted that the possessions that are taking place are long-term cases from before the pandemic.
Eric Leenders, managing director of pesonal finance at UK Finance, said: “2023 was a tough year for UK households and we expect to see continued challenges in 2024. Affordability remains a barrier to home ownership, but pressures should start to ease gradually through this year and next.
“Amidst ongoing cost challenges, it’s encouraging that customers don’t look to be running up higher levels of unsecured debt. But we know some households will be more affected than others - if you are struggling with personal loan, credit card or mortgage repayments, please reach out to your lender as soon as possible for help.”
