In a report by UK Finance, it has been revealed that the number of mortgages granted to home-movers in the UK in 2023 decreased to its lowest level since the mid-1970s. The challenging year for UK households resulted in a 26% decline in home-mover loans compared to 2022, with only 251,000 loans approved. Additionally, mortgages for first-time buyers also experienced a significant decrease, with only 287,430 loans granted, the lowest since 2013.
The decrease in mortgage approvals for home-movers and first-time buyers was attributed to affordability pressures, following the increase in mortgage rates after the mini-Budget in September 2022. The challenging economic environment, combined with higher mortgage interest rates, led to a sharp decrease in mortgage lending across all sectors throughout 2023.
As affordability became a barrier to home ownership, many first-time buyers opted for longer mortgage terms, with around one in five borrowing for more than 35 years. Furthermore, total personal savings levels decreased each month in 2023, as households dipped into their savings to cover higher expenses and spending.
Despite the strain on household finances, UK Finance noted that households managed unsecured debt well, with only half of all credit card balances being interest-bearing, the lowest proportion since 1995. While mortgage arrears increased, they still represented less than 1% of the total number of outstanding mortgages, and the number of repossessed homes remained relatively stable.
Looking ahead, Eric Leenders, managing director of personal finance at UK Finance, acknowledged the challenges that households are likely to face in 2024. Affordability issues are expected to gradually ease over the next year, offering a glimmer of hope for prospective homebuyers.
In light of the ongoing financial challenges, UK Finance encouraged individuals struggling with personal loan, credit card, or mortgage repayments to promptly seek assistance from their lenders. The organization emphasized the importance of proactive communication with lenders to address financial difficulties.
The report serves as a reminder of the impact of economic volatility on the housing market and household finances. As the Chancellor prepares to deliver the Budget, stakeholders will be keen to see policies that can address the affordability barriers and support the recovery of the housing market.
In conclusion, the decline in home-mover loans in 2023 reflects the challenging economic landscape that UK households faced. Despite the difficulties, there is optimism for gradual improvement, and it remains crucial for individuals to seek help from their lenders when facing financial hardships. The findings underscore the need for targeted interventions to support homebuyers and bolster the resilience of UK households in the face of economic uncertainty.
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