Mortgage lending is expected to fall and arrears rise in the new year on the back of higher rates and lower housing demand, banking sector body UK Finance has said.
Lending for purchases will likely sit at £120 billion next year, the group forecast, down on £130 billion in 2023.
Arrears will likely climb from 105,600 to 128,800 cases where over 2.5% of the outstanding balance is owed between the end of 2023 and 2024, meanwhile.
“Mitigating factors” will ensure that this peak is not as drastic as previously though, UK Finance reassured.
This includes the likes of affordability tests, introduced in 2014, and low UK unemployment, which sat at 4.3% as of July, as per the Office for National Statistics.
“With a continuing favourable labour market, extensive lender forbearance and gradually improving affordability, the vast majority of customers now falling behind will eventually recover their positions,” the group said.
Repossessions are anticipated to climb from 4,400 this year to 5,100 in 2024, with many cases likely relating to historic issues, UK Finance continued.
Borrowing has been constrained in 2023 due to inflationary pressures coupled with high interest, the group’s analytics head, James Tatch, said, while house prices have also remained elevated relative to incomes.
“With these pressures unlikely to ease significantly in the short-term, we expect lending to remain weak in 2024, with a gradual improvement in affordability reflected in a modest increase in activity levels in 2025,” he added.