According to the UK Finance Household Review for Q3 2022 half of all first-time buyers, and over a quarter of home movers opted for a mortgage term over 30 years.
This years Q3 figures are higher than figures at the same period 10 years ago with only a quarter if first-time buyers, and less than one in 10 choosing a mortgage over 30 years. This follows an increasing trend of people choosing longer term mortgages, which the review shows has risen significantly since 2021, which the review claims is reflective of rising house prices and new mortgage rates affecting affordability.
However, the review also found that the average income of those taking out mortgages has risen with the average income standing at slightly below £60,000 which is 17% higher than during Q3 last year. The review also suggest this could indicate lower income households not buying homes.
The review concluded that although house purchasing activity right now is similar with pre-Covid levels demand is expected to dip in 2023.
Krishnapriya Banerjee, a Managing Director in Accenture’s UK Banking practice, added:
“Waning consumer confidence shows that people are bracing for tougher times ahead and seeking to stretch affordability. Banks will need to address the twin challenge of supporting households through this uncertain economic period whilst ensuring they have sufficient operational resilience to handle the weight of growing customer demands. Digital tools that leverage artificial intelligence and behavioural economics can be used to help anticipate customers’ needs and assist those facing financial hardship.”
Simon Webb, managing director of capital markets and finance at LiveMore, said:
“This data shows that half of borrowers are now taking out a mortgage over 30 years, instead of what used to be the more usual 25 years. The increase in house prices has been a significant factor in this but now rising rates are impacting affordability. This is only likely to continue as the cost of living crisis looks set to continue for the foreseeable future.”
However, Richard Pike, Phoebus Software chief sales and marketing officer, stated:
“Although the data in the latest UK Finance household spending review is from Q3, it does give us a more overarching picture of the market and what may be to come. As we head towards the new year we are unlikely to see much change during what is traditionally a quieter time of the year. However, we should be prepared for a slower pick-up than we would normally expect as consumers count the cost of Christmas along with rising costs generally. Although mortgage rates have been coming down recently, this may not be the case if the Bank of England puts the base rate up again next week.
Seeing that early arrears were on the rise is a note of caution for lenders to be prepared going into 2023. They will not only need staff on the ground to assist borrowers, but they will also need all their systems in place to detect early signs of borrowers in difficulty. Without the proper back-office technology the process of early detection and intervention is more difficult and potentially damaging down the line. It’s a case now of being prepared.”
