Affordability constraints and a reduction in house buying and selling activity impact figures
The sharp fall in borrowing for house purchases continued in the second quarter of the year, with activity down nearly a third compared with the same period in 2022, UK Finance has reported.
The trade body said first-time buyer purchases and home mover purchases were down 28% and 30% respectively in Q2 2023 compared to the same period of the previous year, largely due to uncertainty in the market, as well as affordability issues.
Affordability constraints impacted some external remortgaging activity and resulted in internal product transfers being more popular. The second quarter saw 84% of remortgaging deals being internal product transfers and within that, April was a record monthly high at 88%.
Results of UK Finance’s latest Household Finance Review also showed that the rapid increase seen in borrowing over a longer term as a means of stretching affordability looks to have reached its limit and is now falling away as the market cools.
UK Finance has earlier reported that the total number of customers in arrears with their mortgages has increased from April to June, compared with the previous quarter.
It has also released its Later Life Lending update for Q2 2023, which showed that 30,400 new loans were advanced to older borrowers in the second quarter, down 38.5% year on year. The value of this lending was £4.3 billion, down 45.7% compared with the same period in the previous year.
“Whilst the cost-of-living challenges have created acute hardship for many, we have also seen that other consumers were largely able to pay off their credit card bills and meet their monthly mortgage payments,” commented Eric Leenders, managing director of personal finance at UK Finance. “Some have been dipping into their savings to help to pay the bills, whereas some of those with savings have moved their money to accounts with higher rates to maximise their income.
“Around 700,000 borrowers have come off their fixed rate deal in the first half of this year and likely found themselves on a much higher rate, which continue to be largely affordable because of the ‘stress tests’ applied when the mortgage was originally taken out. But circumstances can change, so if anyone is struggling with their mortgage payments, they should reach out to their lender who will have a range of tailored support available to help.”
Last month, UK Finance launched ‘Reach Out’, a campaign to encourage people to reach out to lenders if they are struggling with their mortgage payments.
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