Yahoo Finance Lending for house purchase mortgages to drop 23% amid rising interest rates
Lending for house purchase mortgages is set to plunge 23% as UK households tackle a cost of living crisis amid rising interest rates that makes borrowing expensive.
Overall mortgage lending is expected to fall 15%, returning to pre-pandemic levels, according to UK Finance.
The trade body expects the number of property transactions to fall 21% next year from around 1.2 million in 2022 to 1 million in 2023.
The value of lending to homeowners is set to fall 23% and lending to landlords should drop by 27%.
Read more: Interest rates: Record rise in 30-year mortgages for first-time buyers
"As we look ahead, the mortgage market is expected to enter a period of relative weakness from next year as house prices, the cost of living and interest rate pressures put a brake on new demand,” James Tatch, from UK Finance said.
There will also be a strong demand for refinancing as around 1.8 million fixed rate mortgage deals are scheduled to end in 2023.
“The pressures being seen on household finances could mean that some customers have fewer options. However, there is wide availability of product transfers — we would encourage customers to speak to a whole of market mortgage adviser to discuss the options best suited to their circumstances,” Tatch added.
Still, UK Finance expects refinancing overall to be strong, with the market forecast to see around £212bn of product transfers to take place next year, compared with an estimated £197bn this year.
Read more: House prices: Should you buy or sell your house next year?
As the UK economy enters a prolonged recession amid record high inflation, most UK households will struggle to pay their mortgage. Some families will just not able to meet those payments, according to UK Finance.
“We expect this pressure will begin to show in rising mortgage arrears from early 2023, increasing through the year and into 2024. We anticipate the number of households in arrears to reach 98,500 next year, representing around 1% of outstanding mortgages,” UK Finance said, adding that these increases remain low by historic standards.
