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Home-mover loans slumped to lowest level since 1970s in 2023, says UK Finance

The number of mortgages handed out to home-movers last year slumped to its lowest level since the mid-1970s, as affordability pressures led to a weak market for property loans, according to a trade association.

UK Finance, which represents the banking and finance industry, said the 251,000 loans handed out to home-movers last year was the lowest figure since 1974, marking a 26% decline compared with 2022.

At 287,430, the number of mortgages handed out to first-time buyers last year was the lowest since 2013, down 22.4% compared with 2022.

The figures were released as Chancellor Jeremy Hunt prepares to deliver his Budget later this week.

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Mortgage rates surged following the mini-Budget in September 2022.

Fixed rates have been moving down over recent months, but some have edged up slightly recently, amid shifting expectations over when the Bank of England may start cutting interest rates.

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, UK Finance said.

By the end of 2023, around one in five first-time buyers were borrowing for a term of more than 35 years, compared with fewer than one in 10 the year before, as a means of improving their affordability position.

Meanwhile – in something that has not been seen for at least 25 years – total personal savings levels fell each month last year, as households raided their rainy-day funds to cover higher bills and spending, UK Finance said.

Despite the continuing cost-of-living pressures, households are managing unsecured debt well, the body said. Half of all credit card balances were interest-bearing, marking the lowest proportion since 1995 when comparable records started.

Mortgage arrears increased last year, although they still account for less than 1% of the total number of outstanding mortgages. The number of homes being repossessed remains largely static, the household finance review said.

Eric Leenders, managing director of personal 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 (non-mortgage) 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.”