Mortgage lending predicted to fall in 2024

Lending for house purchases is expected to fall by 8% next year, according to a new report.

UK Finance, the trade association for the UK banking and financial services sector, said that high interest rates and household costs will continue to make it hard for buyers to pass affordability tests in 2024.

The report predicted that mortgage lending for house purchases in the UK would fall from £130bn in 2023 to £120bn next year.

At the same time, repossessions — although remaining “incredibly low” by historic comparisons — are expected to go up from 4,400 this year to around 5,100 in 2024.

James Tatch, head of analytics at UK Finance, said that 2023 was a “challenging year” for both prospective and existing mortgage borrowers, with affordability pressures from higher interest rates and increased living costs as well as house prices still at elevated levels relative to income.

However, the main pressures on affordability appear to be peaking and the lending outlook is brighter for 2025.

“By 2025, the combination of wage growth, softer house prices and inflation and interest rates falling back somewhat will see a gradual recovery in lending activity as affordability improves,” UK Finance said.

The Bank of England’s final interest rate decision of the year will be announced on Thursday.

In November, interest rates were held at 5.25% for the second consecutive month. Rates are expected to remain at that level for some time, with a reduction not anticipated until the second half of next year.