UK mortgage lending is forecast to fall by an additional 5 per cent to £215bn subsequent yr earlier than recovering in 2025, in line with UK Finance.
Analysis by the commerce physique stated that “the outlook for 2024 is considered one of persevering with challenges within the mortgage market”, though the principle pressures on affordability seem like peaking in the mean time.
2023 noticed a 28 per cent year-on-year fall in gross lending to £226bn, as larger rates of interest deterred would-be homebuyers and landlords.
Learn extra: Purchase-to-let arrears double as landlords really feel larger 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 additional eight per cent subsequent yr to £120bn, and buy-to-let buy lending to fall by an additional 13 per cent to £7bn.
“2023 was a difficult yr for each potential and present mortgage debtors, dealing with affordability pressures from larger rates of interest and the elevated cost-of-living, in addition to home costs nonetheless at elevated ranges relative to revenue,” stated James Tatch, head of analytics at UK Finance.
Learn extra: Particular person mortgage debt is lowest on document 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 count on 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 yr to 105,600, whereas possessions went up by 13 per cent to 4,400.
UK Finance is forecasting arrears to extend to 128,800 instances by the top of 2024 and possessions to extend to five,100. It expects arrears to rise extra modestly in 2025 to 137,800 instances, as strain on mortgage funds begins to recede.
Learn extra: Purchase-to-let arrears worsening at sooner fee than owner-occupied mortgages
“The difficult setting has additionally pushed extra households into mortgage arrears,” stated Tatch. “Nonetheless, the rigorous affordability assessments 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 strain on their funds. Though we forecast extra clients will encounter arrears subsequent yr, we count on numbers to peak effectively beneath ranges seen beforehand.”