Home loans market “remained weak” in the third quarter

Mortgage rates

The drop in house purchase lending continued, with cost-of-living pressures and higher interest rates presenting a considerable barrier to mortgage affordability

Mortgage lending “remained weak” in the third quarter of the year, which saw 26 per cent fewer home moves compared to a year ago, according to data from UK Finance.

The drop in house purchase lending continued, with cost-of-living pressures and higher interest rates presenting a considerable barrier to mortgage affordability, says the banking trade body’s third-quarter Household Finance Review.

It says: Indications are that the final quarter of the year will show a further contraction.

FTB activity is 22 per cent lower compared with the first nine months of last year, it adds.

Lending to both first-time buyers and home movers has now dropped, year on year, in every month since December last year, the study says.

The report points out that interest rates have increased to 5.25 per cent from 0.1 per cent in December 2021, which has pushed up mortgage borrowing and the cost of living.

It says: Those with smaller deposits or needing to borrow more relative to income are facing much greater challenges in meeting affordability rules.

The study says this year the number of first-time buyers who had incomes of less than £50,000 dropped to 46 per cent.

This compares with 57 per cent of first-time buyer households on income of less than £50,000 in 2021.

The report says: These customers are now having to put down deposits equal to twice their annual earnings, considerably more than in recent years.

However, borrowers with higher incomes have not seen the same shift in increased deposit, it adds.

UK Finance MD of personal finance Eric Leenders says: 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.

Leenders says: Importantly, this will not be the case for everyone, and we may see an increase in customers concerned about their repayments.

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