Mortgage Market Recovery Yet to Materialise

As I sit down to write this article, I’m reminded of the optimism that filled the air towards the end of last year. Mortgage rates were reducing, and applications were on the rise. It seemed like the market was finally going to recover in the first half of 2024. But, as the latest figures from UK Finance reveal, that recovery has yet to materialise.

The wait for a mortgage market recovery continues

The number of mortgage customers in arrears has also grown, with 110,150 cases reported in Q1 2024. While the rate of growth is modest, it’s a worrying trend that highlights the ongoing affordability issues in the market.

One of the ways borrowers are trying to cope with high costs and house prices is by opting for longer-term mortgages. In Q1, 21% of new first-time buyers chose mortgages with terms over 35 years. This trend, according to UK Finance, points to more entrenched affordability issues.

“The trend of longer-term mortgages points to more entrenched affordability issues as costs and house prices remain high relative to incomes.” - UK Finance

The pattern of refinancing has also changed, with external lending falling 21% compared to Q1 2023. Internal product transfers, which don’t require an affordability assessment, have become more popular, growing 9% year-on-year.

The shift in refinancing patterns

Mortgage arrears and possessions are also on the rise. While the number of mortgage repossessions in Q1 2024 is still below pre-pandemic levels, it’s a worrying sign that borrowers are struggling to keep up with their payments.

Mortgage arrears on the rise

As I reflect on the state of the mortgage market, I’m reminded of the importance of affordability and the need for sustainable lending practices. The wait for a market recovery may be longer than we thought, but it’s crucial that we learn from the current trends and work towards a more stable future.

The wait for a mortgage market recovery continues