PriyaPatelTLDR:
Homemover mortgages in the UK have hit a 50-year low, with a significant drop in loans for both homemovers and first-time buyers. Affordability challenges, higher interest rates, and the cost of living have all contributed to a weak mortgage market in 2023. However, there is optimism for a recovery in early 2024.
Summary:
According to data from UK Finance, homemover mortgages in the UK plummeted by 26% last year, reaching the lowest level since 1974. Affordability challenges have led to a weak mortgage market, with one in five first-time buyers opting for mortgages with terms of 35 years or more, compared to one in ten the year before.
The number of loans made to first-time buyers also fell by 22.4% from the previous year, hitting their lowest level since 2013. In contrast, wider homemovers, who do not receive the same support as first-time buyers, were even harder hit by higher interest rates and cost of living pressures.
The report suggests that affordability pressures are likely to continue into 2024, although there is some hope for a recovery in the first quarter. The increased cost of living, coupled with higher mortgage rates, led to a sharp decline in mortgage lending across all sectors in 2023.
Household savings levels fell for the first time in 25 years, as households dipped into rainy-day funds to cover expenses. However, there was a rise in mortgage loan applications in the fourth quarter of 2023, indicating a potential market growth in early 2024 with easing inflation pressures and lower borrowing costs expected.
Eric Leenders, the managing director of personal finance at UK Finance, acknowledges the challenges faced by UK households in 2023 and anticipates continued difficulties in 2024. However, he believes that affordability barriers to homeownership may gradually ease over the coming year.
