Mortgage lending is set to slump next year, as the number of arrears and repossessions increases, according to a trade association representing the UK banking and finance industry.
The outlook for 2024 is one of continuing challenges in the mortgage market, but the main pressures on affordability look to be peaking now, UK Finance said.
With that said, one expert forecasts the market will perform “better” than what many are expecting.
Ben Thompson, deputy CEO at Mortgage Advice Bureau, said: “There is no getting away from the fact that 2023 has been a challenging year full of surprises – some welcome, some less so.”
However, he noted: “The market has steadily improved since the summer lows, and at least we are seeing some reasonable activity as the year draws to a close. 2024 will most likely be a game of two halves.”
Mr Thomspon explained: “I expect the market to perform at a similar level to how it is now, through until the spring. It should then start to gather a bit more pace as we head towards summer.
“There is a tiny chance we get a small rate cut or two also towards the end of 2024 and that will further buoy the market.”
While the upturn won’t be explicitly linked to interest rates, Mr Thompson said this “will help”, and as consumers start to see early signs of growth, they will gather confidence and the momentum in the market may pick up.
He continued: “First-time buyers will move first, having perhaps held off buying for the last year or two, and because the cost of renting has really soared.
“We may even get some help from the Chancellor next year – I hope there is some permanent change to SDLT (Stamp Duty Land Tax), in particular change that makes it easier for existing homeowners to move more freely towards larger and more suitable housing.
“Whereas for many now, the cost of SDLT is prohibitively expensive, especially now house prices have been flat for a while, and it can’t as easily be paid now simply from equity alone.
“Finally, we are now seeing real wage growth too – the economy whilst unexciting, has not despite miserable predictions, fallen into a recession, and of course – we do have much more competitive mortgage rates now available. So, I quietly hope that 2024 is better than many are forecasting.”
Analysts at UK Finance said that while it will take some time for the current pressure on household finances to recede, it expects the situation to improve in 2025.
Giving its predictions for next year, UK Finance said it expects lending for house purchases to fall from £130billion in 2023 to £120billion next year.
External remortgaging activity is expected to fall to £60billion, from £65 billion this year. Meanwhile, the value of internal product transfers is also predicted to fall, from £219billion this year to £202billion in 2024.
Mortgage arrears are forecast to rise from 105,600 cases by the end of 2023 with arrears of over 2.5 percent of the outstanding balance, to 128,800 by the end of 2024.
There were an estimated 4,400 repossessions through 2023, which UK Finance said is “an incredibly low number by historic comparisons”.
Next year, it expects to see a small increase to around 5,100, with this activity still relating to historic cases, most of which pre-date the coronavirus pandemic.
The report said: “With a continuing favourable labour market, extensive lender forbearance and gradually improving affordability, the vast majority of customers now falling behind will eventually recover their positions.
“The very small minority of cases where this is not possible will not feed through into any material increase in possessions over our forecast period.”
External remortgaging activity is expected to fall to £60billion, from £65 billion this year. Meanwhile, the value of internal product transfers is also predicted to fall, from £219billion this year to £202billion in 2024.
Mortgage arrears are forecast to rise from 105,600 cases by the end of 2023 with arrears of over 2.5 percent of the outstanding balance, to 128,800 by the end of 2024. There were an estimated 4,400 repossessions through 2023, which UK Finance said is “an incredibly low number by historic comparisons”.
Next year, it expects to see a small increase to around 5,100, with this activity still relating to historic cases, most of which pre-date the coronavirus pandemic.
The report said: “With a continuing favourable labour market, extensive lender forbearance and gradually improving affordability, the vast majority of customers now falling behind will eventually recover their positions.
“The very small minority of cases where this is not possible will not feed through into any material increase in possessions over our forecast period.”
