Mortgage Borrowing Down in Q1: A Cause for Concern?
As the UK mortgage market continues to navigate the challenges of high interest rates and affordability constraints, the latest figures from UK Finance reveal a concerning trend. Despite a growth in mortgage applications at the end of 2023, borrowing for house purchases in the first quarter of 2024 was down compared to the same period last year.
The Challenges of Mortgage Borrowing
The data suggests that the market is yet to see a sustained recovery, with mortgage rates remaining high and affordability issues persisting. The trend of borrowing at longer terms to reduce monthly repayments has also dipped slightly in Q1, but remains high. A staggering 21% of new first-time buyers extended their mortgage terms over 35 years, highlighting the difficulties many face in getting onto the property ladder.
“Some households were in a better place financially in Q1 this year, but we are not out of the woods yet.” - Eric Leenders, UK Finance managing director of personal finance
The affordability constraints are also changing the pattern of re-financing, with external lending falling by 21% compared to Q1 2023. Meanwhile, internal product transfer continued to grow, up 9% year-on-year. These shifts in borrower behavior are a clear indication of the ongoing challenges in the market.
Mortgage Borrowing Trends
The number of mortgage customers in arrears grew to 110,150 in Q1 2024, up from 107,250 cases in Q4 2023. While early arrears cases fell slightly, the overall trend is a cause for concern. The 1,470 mortgage repossessions in Q1 2024, although below pre-pandemic levels, serve as a stark reminder of the difficulties many households face.
As the cost of living pressures continue to impact households across the UK, lenders must remain vigilant in supporting those who may be struggling. With 1.6 million mortgages due to come off fixed rates this year, the challenges ahead are clear.
Mortgage Borrowers Face Uncertain Times
In conclusion, the latest figures from UK Finance paint a concerning picture of the UK mortgage market. As we move forward, it is essential that lenders, policymakers, and industry experts work together to address the affordability constraints and support those who are struggling. Only through collaboration and innovation can we hope to mitigate the challenges ahead and create a more sustainable mortgage market.
Note: The images used in this article are for illustration purposes only and do not reflect the actual content of the article.
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