Property transactions are set to fall by 21% next year with lending to homeowners also falling by 23% amidst cost of living pressures and rising interest rates, new data from UK Finance has revealed.
As part of their mortgage market forecast for 2023-24, the financial services body predicted a “softening” of the market which will see transactions fall from around 1.2 million in 2022 to 1 million in 2023 and 991,000 in 2024.
This is, however, above the 870,000 predicted for 2023 by Savills in November – perhaps a sign that the outlook is not as bleak as once thought, though still well beneath the pre-pandemic average of 1.2 million transactions per year.
Elsewhere in the report it was said that, while the vast majority of borrowers will be able to maintain mortgage payments, the affordability pressures will see households in arrears reaching 98,500 next year, or 1% of outstanding mortgages. This remains low by historic standards, and UK Finance do not expect possessions to rise until well into 2024.
“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,” said James Tatch, Principal, Data and Research at UK Finance.
“UK Finance is expecting a downturn in all areas of the mortgage market in 2023,” added Simon Webb, managing director of capital markets and finance, LiveMore. He said that the cost-of-living crisis, high inflation, higher interest rates, and the UK’s recession will all contribute to a decline in mortgage activity, continuing:
“Although house purchase lending is forecast to fall, remortgaging will pick up as an estimated 1.8 million remortgages are due to expire next year. There will be a rise in product transfers as it will be is easier for some borrowers to do this than remortgage.
If people bought in 2021 during the stamp duty holiday and paid top price for their home, in some cases it may have gone down in value. House price growth is now falling and many commentators are predicting a drop in prices. If borrowers took out two-year fixed rates, they will need to remortgage this year and may find they can’t pass affordability tests and their only option is a product transfer.”
To read the full UK Finance report, click here.
