Mortgage Market Trends: A Closer Look at the Latest Data

The latest data from UK Finance has revealed some interesting trends in the mortgage market. One of the most notable trends is the increasing number of first-time buyers taking out mortgage terms stretching beyond 35 years. In fact, around one in five new first-time buyers took out mortgage terms of this length in the first quarter of this year.

This trend is further evidence of the ongoing affordability crunch in the UK housing market. With house prices remaining high relative to incomes, many first-time buyers are being forced to take out longer-term mortgages in order to make their monthly repayments more manageable.

But what does this trend mean for the wider economy? And what are the implications for households who are taking out these longer-term mortgages?

The Impact of Longer-Term Mortgages

The trend of longer-term mortgages has the potential for wider societal implications. As households take out mortgages that stretch into retirement, they may have less free income available for other important considerations, such as pension contributions.

This could have a knock-on effect on the wider economy, as households may be less likely to invest in other assets or make large purchases. Additionally, the trend of longer-term mortgages could also impact on the housing market, as households may be less likely to move home or take out new mortgages.

Mortgage Lending Remains Subdued

Despite the trend of longer-term mortgages, mortgage lending remains subdued. According to the latest data from UK Finance, borrowing for homebuying was down in the first three months of this year compared to the same period in 2023.

The number of new loans for first-time buyers fell by three per cent to 66,410, while loans for home movers dropped by 6.6 per cent to 54,720. This is despite expectations of near-term rate cuts from the Bank of England, which had triggered a surge in mortgage applications at the end of last year.

The Bank of England is now widely expected to cut rates in either August or September, with predictions pushed back following hotter-than-expected inflation figures for April last month. Markets are now betting on two rate cuts in 2024, down from six at the start of the year.

Household Finances in a Better Place

Despite the challenges facing the mortgage market, household finances are in a better place than they were last year. According to the latest data from UK Finance, the number of mortgage customers in arrears grew to 110,150 in the first quarter of this year, but the rate of growth was modest.

Additionally, the number of mortgage repossessions fell to 1,470 in the first quarter of this year, below pre-pandemic levels. This suggests that households are managing their finances more effectively, despite the challenges facing the mortgage market.

Conclusion

The latest data from UK Finance has revealed some interesting trends in the mortgage market. The trend of longer-term mortgages is further evidence of the ongoing affordability crunch in the UK housing market, and has the potential for wider societal implications.

Despite the challenges facing the mortgage market, household finances are in a better place than they were last year. However, the trend of longer-term mortgages is a reminder that households need to be careful when taking out mortgages, and should consider seeking advice from a financial advisor before making any decisions.

Mortgage market trends

House prices

Interest rates

Mortgage lending

Household finances

Mortgage customers in arrears

Mortgage repossessions