Despite initial hopes of a rebound in the mortgage market in the first half of 2024, latest figures released by bank trade body UK Finance show that the market has slowed compared to the same period in 2023.
Over the first three months of 2024, borrowing for home buying was down, largely due to reduced optimisms over interest rate cuts from the Bank of England (BoE).
New loans for first-time buyers dropped 3% to 66,410, while loans for home movers fell 6.6% to 52,720.
However, compared to the double-digit contractions that occurred throughout 2023, the decline is much slower, with interest rate hikes and affordability pressures affecting prospective buyers.
A surge in mortgage applications arrived towards the end of last year that followed through into the start of 2024, mostly in expectation of interest rate cuts being announced by the BoE.
In February, UK mortgage approvals reached their highest level in 17 months, according to central bank data.
It is widely expected that the BoE will cut rates in August or September, with two rate cuts now anticipated instead of the six initially predicted at the start of the year.
While “some growth” is expected by UK Finance in the second quarter, mortgage borrowing is likely to remain challenging “until affordability recovers to more sustainable levels”.
“Some households were in a better place financially in Q1 this year, but we are not out of the woods yet,” said Eric Leenders, managing director of personal finance at UK Finance. “Cost of living pressures remain, and with 1.6m mortgages due to come off fixed rates this year, there may be challenges ahead for some.”
Borrowing at longer terms to reduce monthly repayments remained high, with 21 per cent of new first-time buyers extending terms over 35 years.
110,150 mortgage customers were in arrears during the first quarter, up from 107,250 in the previous three months. 1,470 mortgage repossessions were recorded between January and March, which is lower than pre-pandemic levels.
