Surging home costs and borrowing prices have pushed a pointy rise in homebuyers taking out loans of 35 years or longer, based on new knowledge.
Banking commerce physique UK Finance’s latest Household Finance Review discovered that one in 5 first-time consumers took out a mortgage of not less than 35 years in 2023, in contrast with fewer than one in 10 in 2022.
Borrowers scuffling with affordability pressures usually select longer mortgage phrases to cut back the cost of their month-to-month funds.
Meanwhile, the variety of home loans to first-time consumers plunged 22 per cent from the earlier 12 months to its lowest degree since 2013. Mortgage lending fell throughout the board as debtors struggled with increased rates of interest and the cost-of-living disaster.
Home movers had been hit the toughest, with loans falling 26 per cent to 251,000 – their lowest degree since 1974.
Despite the weak spot of the mortgage market, the variety of purposes for home loans rose within the closing quarter of 2023 as inflationary pressures eased and borrowing prices moderated.
Mortgages in arrears of two.5 per cent or extra rose for a fifth straight quarter within the closing three months of 2023 to 107,250. This determine is up 32 per cent year-on-year, though nonetheless represents lower than one per cent of complete excellent mortgages. UK Finance expects arrears to maintain rising in 2024, albeit at a slower tempo.
Meanwhile, the variety of possessions remained largely flat final 12 months totalling 4,620, with most being long-term instances from earlier than the Covid-19 pandemic.
The group additionally discovered that non-public financial savings ranges fell every month final 12 months – the primary time this has occurred in 25 years – as households raided their rainy-day funds to cowl increased payments.
UK Finance added that households had been managing unsecured debt properly regardless of the cost-of-living disaster, with overdraft debt remaining on a downward development and half of all bank card balances being interest-bearing – the bottom proportion since UK Finance’s data started in 1995.
Eric Leenders, managing director of non-public finance at UK Finance, mentioned: “2023 was a tricky 12 months for UK households and we count on to see continued challenges in 2024. Affordability stays a barrier to home possession, however pressures ought to begin to ease regularly by means of this 12 months and subsequent.
“Amidst ongoing cost challenges, it’s encouraging that customers don’t look to be running up higher levels of unsecured debt. But we know some households will be more affected than others – if you are struggling with personal loan, credit card or mortgage repayments, please reach out to your lender as soon as possible for help.”
