In 2023, the UK housing and mortgage market faced challenges marked by higher interest rates and increased household costs, limiting access to mortgage credit. Affordability constraints led to a decline in external remortgaging, while internal product transfers, not requiring affordability tests, experienced growth. The cost of living and interest rate pressures contributed to a rise in arrears, although still representing only around 1% of total outstanding mortgages.
Key figures for 2023:
Gross Lending: £226 billion (-28% year-on-year)
Lending for house purchase: £130 billion (-23% year-on-year)
External remortgaging: £65 billion (-21% year-on-year)
Internal product transfer: £219 billion (+11% year-on-year)
New buy-to-let purchase lending: £8 billion (-53% year-on-year)
Arrears: 105,600 (+30% year-on-year)
Possessions: 4,400 (+13% year-on-year)
Looking ahead to 2024, UK Finance anticipates continuing challenges in the mortgage market, but the main pressures on affordability are expected to peak. Prudent lending standards and lender forbearance are predicted to minimise the number of customers struggling with mortgage payments. Forecast figures for 2024 include:
Gross lending to fall by 5% to £215 billion
Lending for house purchase to fall by 8% to £120 billion
External remortgaging activity to fall by 8% to £60 billion
Internal product transfers to fall by 8% to £202 billion
Buy-to-let purchase lending to fall by 13% to £7 billion
Arrears to increase to 128,800 cases by the end of 2024
Possessions to increase by 16% to 5,100
While the outlook for 2024 remains challenging, the organisation expects a gradual improvement in affordability and a modest increase in activity levels in 2025.
Market Overview:
In 2023, higher cost-of-living and interest rate rises raised affordability barriers, leading to a 23% decline in lending for house purchase. Despite some easing in cost pressures in 2024, continued challenges in prices and interest rates are expected to result in an 8% decline in house purchase lending to £120 billion. The external remortgage market fell by 21% in 2023 to £65 billion, with internal product transfers growing by 11% to £219 billion. While both external remortgaging and internal product transfers are expected to decline slightly in 2024, conditions are projected to improve in 2025.
Buy-to-Let Activity:
Buy-to-let lending faced multiple challenges, including cost and rate pressures, taxation, and regulatory headwinds. In 2023, new buy-to-let house purchase lending fell by 53%, and remortgaging declined by 47%. UK Finance forecasts a smaller contraction in 2024, but challenges for buy-to-let investors, especially smaller-scale landlords, persist.
Arrears:
The pressure on household finances in 2022 led to an increase in mortgage arrears, reaching 105,600 cases by the end of 2023, a 30% increase from December 2022. The forecast for 2024 anticipates a rise to 128,800 cases, with a more modest increase to 137,800 cases in 2025 as the pressure on mortgage payments begins to recede. Despite the increase, arrears are expected to peak well below levels seen in previous cycles.
A word from our Director, Matthew Ryder, on the year.
"It's been a crazy year for mortgage rates, which have in turn have increased rents across Bristol. Good news with high street banks announcing sub 4% mortgages in December, and with inflation having fallen by over 50% this year, we'd expect this to calm down in 2024.
Increased rates and reduced borrowing mean less interest from investors, which in turn means less properties for tenants to rent.
We feel the rise in mortgage rates have directly contributed to rising rents, as landlord's are squeezed with rising mortgage costs and agent fees, it makes the rental property less (or not) profitable, meaning Landlords have looked to sell off a lot of rental properties this year which has also, in turn, lowering the supply for rents, further pushing up prices.
The cost of living has had an effect on accidental Landlord's too, with more choosing to sell off the property, rather than rent it, again increasing demand of rental properties across the city. "
Some quick solutions?
If you are on a variable rate, fix in for a lower rate, or re-mortgage the property, releasing funds to complete work on the property to give tenant's more for their money. We can refer you to the Mortgage Quarter to compare rates with a large panel of lenders
Move to R&G Property Bristol to save you money on every single agent fee, and ensure you're still compliant and well looked after.