A recent report released by UK Finance has forecasted a significant decline in mortgage lending for the year 2024. The report also highlighted an increase in the number of arrears and repossessions, indicating a challenging outlook for the mortgage market in the upcoming year.
As per the trade association representing the UK banking and finance industry, the primary pressures on affordability are expected to reach their peak. Although it is projected that the pressure on household finances will take some time to diminish, an improvement is anticipated in 2025.
The outlook for the following year suggests a decrease in lending for house purchases, with an expected drop from £130 billion in 2023 to £120 billion in 2024. Additionally, external remortgaging activity is also predicted to fall from £65 billion to £60 billion, and the value of internal product transfers is expected to decrease from £219 billion in 2023 to £202 billion in 2024.
The report noted that despite these challenges, over 99% of the 10.8 million mortgages in the UK are currently not in arrears due to various mitigating factors. These factors include affordability tests for all new lending since 2014, low unemployment rates, and tailored forbearance options available for borrowers facing financial difficulties.
It is projected that mortgage arrears will rise from 105,600 cases by the end of 2023 to 128,800 by the end of 2024. Similarly, repossessions are expected to see a small increase from 4,400 cases in 2023 to around 5,100 in 2024, mostly relating to historic cases predating the coronavirus pandemic.
Despite the challenges faced by prospective and existing mortgage borrowers, UK Finance emphasized that the rigorous affordability tests in place since 2014 are working to ensure that the vast majority of customers can still afford their mortgage payments, even with the increased pressure on their finances.
James Tatch, head of analytics at UK Finance, acknowledged the challenging environment that has pushed more households into mortgage arrears, but assured that the industry continues to provide help to anyone struggling with a range of tailored support options.
The report also highlighted a gradual improvement in affordability, which is expected to be reflected in a modest increase in activity levels in 2025. Furthermore, with a continuing favourable labor market and extensive lender forbearance, the majority of customers falling behind on their mortgage payments are anticipated to eventually recover their positions. It is predicted that the very small minority of cases unable to recover will not result in a significant increase in possessions over the forecast period.
In light of these predictions, it is imperative for borrowers to closely monitor their financial situations and seek assistance from their lenders at an early stage if they encounter any difficulties. Being proactive in addressing financial challenges can potentially prevent further complications and provide individuals with the necessary support to navigate through tough times.
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