Mortgage borrowing slumped in the first quarter of 2023 to its lowest level since the second quarter of 2020, figures showed today.
The data, from the Bank of England, revealed a 28% drop in lending to homeowners in the three months to March 31, compared to the previous quarter and 23.6% lower than the year before.
The value of new mortgage commitments (lending agreed to be advanced in the coming months) was 16.1% less than the previous quarter and 40.7% lower than a year earlier, at £48.9bn, also the lowest observed since quarter two in 2020.
Worringly, the value of balances with arrears increased by 9.5% over the quarter and 12.5% over the year, to £14.9bn.
Sarah Coles, head of personal finance, at Hargreaves Lansdown said: “Higher rates took their toll on our enthusiasm for property."
"There’s every sign they will sink even lower, as approvals for the coming months dropped too,” she added.
The data comes on fresh concerns that interest rates are set to rise even higher following a pick-up in the growth in wages.
The Bank of England’s Monetary Policy Meeting meets next week with a 25 basis point increase pencilled in the market although some think the Bank may need to consider larger hikes if it wants to bring inflation closer to its 2% remit.
Bond yields hit their highest levels since the financial crisis of 2008 and above those seen in the wake Kwasi Kwarteng’s infamous mini-budget in September after the figures.
Financial markets now think borrowing costs could leap to a high of 5.75%, up more than a percentage point from their current level of 4.5%.
Mortgage rates, which dipped at the start of the year, have been moving higher after stronger than expected consumer price inflation readings in the UK and the fast-moving market prompted HSBC and Santander to temporarily pull deals in the last week so they could be repriced in light of expectations of further increases in interest rates.