Mortgage lending still weak in Q3, reports UK Finance

Number of mortgages in arrears up by 9%

Mortgage lending still weak in Q3, reports UK Finance

With borrowers facing significant affordability constraints from increases in the costs of living and higher interest rates, mortgage lending remained weak in the third quarter of this year, UK Finance has reported.

The trade body said lending for house purchases fell throughout the three months to September 2023, continuing the trend that started at the end of 2022.

Mortgage lending was weak in almost every segment of the market, with first-time buyer activity down by almost one fifth and home movers by a quarter in Q3 2023, compared to the same period last year.

UK Finance’s latest Household Finance Review also showed that mortgage refinancing remained strong with affordability pressures and competitive retention deals driving nine out of 10 customers in 2023 to take a product transfer with their existing lender.

As expected, the number of mortgages in arrears rose to 99,840 at the end of Q3, up 9% on Q2. However, even with the increase, mortgages in arrears account for less than 1% of the total number of outstanding mortgages, far below the rate seen in previous arrears cycles. Possessions also remained extremely low by historic comparisons.

“While the cost-of-living continues to challenge households, many are managing to avoid using overdrafts and still have a savings cushion to draw on,” said Eric Leenders, managing director of personal finance at UK Finance. “Importantly, this won’t be the case for everyone, and we may see an increase in customers worried about their repayments.

“Meanwhile, sustained house prices and rising mortgage rates have meant mortgage lending remained weak last quarter, and we expect this to continue in the fourth quarter of this year.”

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