Economic forecaster points to high mortgage rates as one of the causes of the market slowdown
Mortgage lending will increase a measly 1.5% and 2% this year and next – the smallest two-year growth in a decade, according to the latest forecast from EY Item Club.
The economic forecaster said high mortgage rates and the economic headwinds are turning off buyers from buying property and taking on a mortgage.
Net mortgage lending averaged just £300 million per month or from January to September this year, down from the £5.7 billion total over the same period in 2022.
Recent data from the Bank of England has also showed a downward trend in mortgage approvals for both house purchases and remortgages.
According to EY, mortgage lending will improve in 2025, growing by 2.8%, although this growth – dependent on improved situations over inflation and interest rates – will still be below the 3% pre-pandemic average between 2015 and 2019.
“The UK is still on track to avoid recession this year, but the economic environment remains challenging,” commented Anna Anthony, UK financial services managing partner at EY ITEM Club. “Significant cost-of-living pressures continue to affect households’ ability to spend, and an increasing number are finding it difficult to keep up with loan repayments.
“At the same time, businesses’ appetite to borrow and invest has been affected by high borrowing rates. This slowdown in the flow of capital is being felt across the country; from individuals pulling back on daily expenses and putting off home-buying plans, through to banks and asset managers managing low growth portfolios.”
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