UK Finance forecasts a further 8% decline in lending for house purchases, reaching £120 billion next year. The mortgage market is expected to face ongoing challenges throughout 2024. The general question is about its future, which should concern everyone.
The trade body anticipates an 8% decline in external remortgaging activity, reaching £60 billion, and a subsequent 13% decrease in buy-to-let purchase lending, amounting to £7 billion. Additionally, it predicts an increase in arrears to 128,800 cases by the end of 2024. Despite this, possessions are expected to rise by 16% to 5,100—a figure lower than any year from 2019 back to 1981 when the mortgage market was approximately half its current size.
UK Finance anticipates ongoing challenges in the housing and mortgage market in 2024, with affordability pressures peaking. However, a gradual improvement is expected in 2025. Looking back at 2023, it was a tough year for mortgage customers, marked by a 23% decrease in house purchase lending (£130 billion) due to increased living costs and interest rate hikes. The external remortgage market also declined by 21% (£65 billion). Yet, the product transfer market grew by 11% in 2023, reaching £219 billion, as customers opted for deals with existing lenders exempt from affordability tests amid weak new lending volumes.
James Tatch, the head of analytics at UK Finance, commented that 2023 posed challenges for both prospective and existing mortgage borrowers. They faced affordability pressures due to higher interest rates, increased cost of living, and elevated house prices relative to income. Tatch noted that borrowing for house purchases was constrained in the face of these challenges.
Existing customers, seeking to refinance their loans, mostly opted for a product transfer with their current lender, where affordability tests were not required. Tatch expects lending to remain weak in 2024, with a gradual improvement in affordability leading to a modest increase in activity levels in 2025.
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