UK Finance, which represents more than 300 firms in the banking and finance industry, has published its mortgage market forecast for 2023 – 2024, predicting a softening in the UK mortgage market and a return to pre-pandemic levels.
Key points for 2023:
- Overall mortgage lending is expected to fall 15%t, a return to pre-pandemic levels.
- Lending for house purchase mortgages is predicted to fall 23% due to cost-of-living pressures and rising interest rates placing pressure on affordability. New lending to buy-to-let landlords is predicted to fall 27% in 2023.
- Property transactions are predicted to fall by 21% next year.
- Refinancing will increase with strong numbers of fixed rate deals due to end in 2023.
- If a customer is struggling with their payments, lenders will assess a borrower’s financial circumstances and offer a form of forbearance tailored to their individual circumstances.
Amid challenging times for the UK economy, cost of living pressures and rising interest rates are expected to reduce demand for house purchases between 2023 - 2024.
UK Finance forecasts the number of property transactions to fall 21% next year (from around 1.2 million in 2022 to 1 million in 2023), with the value of lending to homeowners dropping 23%, and lending to landlords falling 27%. However, it says despite the anticipated fall in activity, the UK has a strong mortgage and housing market which will remain competitive.
James Tatch, Principal, Data and Research at UK Finance said, "As we look ahead, the mortgage market is expected to enter a period of relative weakness from 2023 as house prices, the cost-of-living and interest rate pressures put a brake on new demand.”
To see the full UK Finance mortgage forecast, click here.