Mortgages plunged and may be heading for rock bottom

Sarah Coles, head of personal finance at Hargreaves Lansdown, comments on the publication of the Bank of England’s Mortgage Lenders and Administrators Statistics, showing mortgages plunged and may be heading for rock bottom.

Key points from publication:

• • We borrowed £58.8 billion in mortgages in the first three months of 2023 – down 23.6% in a year and the lowest since Q2 2020.
  • £48.9 billion of new mortgages were approved for the coming months – down 16.1% in a quarter, 40.7% in a year and the lowest since Q2 2020.
  • £14.9 billion was in arrears – 0.89% of outstanding balances – up 9.5% in the quarter and 12.5% in a year.
  • The outstanding value of all mortgages was £1,675.4 billion – up 2.5% in a year, but down from the previous quarter. It’s the first quarterly drop since Q2 2017.

Sarah Coles says:

“Mortgage borrowing plunged in the first three months of 2023, as higher rates took their toll on our enthusiasm for property.

“There’s every sign they will sink even lower, as approvals for the coming months dropped too. And rate hikes in recent weeks risk sending them to rock bottom.

“Meanwhile, arrears have started to climb.

“Mortgage borrowing fell off a cliff at the start of this year – down almost a quarter from a year earlier.

“Plenty of buyers who completed sales at this stage were likely to have been hunting for a mortgage at the worst possible time – when rates shot up in the aftermath of the mini budget.

“And for every determined buyer who saw it through, there will have been more who were scared back into the rental market.

“Mortgage rates were falling back in early 2023, but this didn’t inspire a wave of approvals. In fact they were down more than 40% in a year.

“Mortgage rates remained significantly higher than before the scare in the autumn, and it put a real dent in buyer confidence.

“The spike of the past few weeks won’t have helped either, so we can expect to see more mortgage misery in the next set of figures.” 

Arrears:

“The rise in people falling behind on mortgage payments is a worrying development. It was always a concern as more people remortgaged from fixed rates of less than 2% and faced impossible hikes in their monthly mortgage payments.

“Even for those whose repayments haven’t changed, the pressure of the rising cost of living may be enough to make the mortgage an impossible stretch.

“The ONS has been charting a gradual rise in people who are behind on rent or mortgage payments.

“This has risen to 4%, and to 6% among people in their 30s and 40s. Some 44% of people now say it’s difficult to cover this cost.

“If you’re struggling to make payments, it’s tempting to put your head in the sand, but the sooner you face the problem, the easier it will be to tackle.

“Your mortgage company has an obligation to offer help – which can range from anything from a payment holiday, to stretching your mortgage over a longer period to make the monthly payments more affordable, so get in touch and ask for help.” 

Kindly shared by Hargreaves Lansdown

Main article photo courtesy of Pixabay