Photo by Mortgage Market Shift: Sales Fall Below 1 Million, Rates to Remain High
The UK mortgage market has experienced a significant decline, with sales falling below 1 million in 2023, according to data from the Financial Conduct Authority (FCA). This marks a substantial drop from the 1.15 million mortgages sold in 2022. The FCA’s mortgage product sales data revealed that the highest number of mortgages were completed in Q3 last year, totalling 239,659. However, this figure is still down from the 299,754 mortgages sold in the same period in 2022.
Mortgage sales decline
Remortgage activity has also slowed, with sales declining from 91,659 in Q1 2023 to 65,200 in Q4. This trend is expected to continue, with the majority of mortgages sold last year being on a fixed interest rate.
“We have just come off a decade where mortgages have been in the 1.5% and 2.5% range,” said Charlie Nunn, CEO of Lloyds Banking Group. “The expectation that markets have is that interest rates won’t get below 3.5% — and that means that the new normal for mortgages will be in that 3.5% and 4.5% range.”
Charlie Nunn, CEO of Lloyds Banking Group
The Bank of England has maintained its base rate at 5.25% since last August, and many economists predict that rates will not decrease until the next vote in August. This has significant implications for households, with around three million expected to see an increase in their mortgage repayments over the next two years.
Bank of England
The Bank’s Financial Policy Committee (FPC) warned that around 400,000 households will experience “very large increases” of more than 50% in their mortgage repayments. This could lead to a significant increase in debt for many households, particularly those who have chosen to borrow over a longer period to reduce their monthly repayments.
Mortgage repayments increase
The FPC also highlighted that many renters are falling behind on their payments, with the share of renters in arrears increasing to 16.5% in Q1 2024. This trend is expected to continue, with many renters intending to reduce their savings further to cope with the increased cost of living.
Renters in arrears
Despite the challenges facing the mortgage market, the banking sector remains strong, with the capacity to support households and businesses even if economic conditions worsen. However, the FPC warned of “global vulnerabilities” in the sector, including policy uncertainty and the risk of a sharp correction in asset prices.
Banking sector
In conclusion, the UK mortgage market is experiencing a significant shift, with sales falling below 1 million and interest rates expected to remain high. Households and renters are facing increasing pressure, with many expected to see significant increases in their mortgage repayments and rent. The banking sector remains strong, but global vulnerabilities pose a risk to the sector.
Mortgage market shift
