UK mortgage lending is forecast to submit decade-low development this 12 months and into 2024, based on EY ITEM Club, amid the very best mortgage charges since 2008.
Home loans in 2023 are anticipated to rise simply 1.5% this 12 months and a pair of% in 2024, the slowest development in ten years, as “economic growth remains subdued and weakening housing market sentiment drives down demand,” says the skilled companies agency’s financial forecasting unit.
Subdued housing market sentiment and better borrowing prices have led web mortgage lending to common round £300m a month between January and September this 12 months, the group says in its latest Outlook for Financial Services report.
This compares to £5.7bn in the identical interval in 2022, when mortgage approvals had been round 40% increased.
The forecast of 1.5% development for 2023 is the weakest since 2011, the examine provides.
However, the physique expects mortgage demand to choose up over 2024 and 2025 supplied inflation continues to fall, the Bank of England cuts rates of interest subsequent 12 months, from its present 5.25% fee, and housing affordability improves.
It forecasts mortgage lending will hit 2.8% in 2025.
But provides: “These figures remain very low in historical terms and sit far below the 3% averaged during the pre-pandemic years of 2015-2019.”
The common two-year fixed-rate residential mortgage fee is 6.29% right this moment, unchanged from Friday, based on Moneyfacts knowledge.
While the typical five-year fixed-rate residential mortgage fee is 5.87%, additionally unchanged from Friday.
UK gross home product grew by 0.2% in August, following a fall of 0.6% in July, based on the latest knowledge from the Office for National Statistics.
EY UK head of banking and capital markets Dan Cooper says: “The ‘higher for longer’ borrowing charges and ongoing cost of dwelling pressures are persevering with to have a really actual influence on clients, and on the similar time, banks are tightening their lending standards.
“Firms are additionally watching impairment ranges carefully, significantly as fixed-rate mortgages roll onto increased rates of interest. However, the mix of tighter regulation imposed post-2008, further help from lenders, and family financial savings constructed up through the pandemic ought to assist preserve defaults to a minimal.
Cooper provides: “Banks are actively working to retain a powerful capital position and help their clients on this difficult market.
“With interest rates now expected to peak at a lower level than previously predicted, we should see a gradual improvement in consumer and business confidence over the next two years, leading to greater appetite to borrow.”
