Home Lending Falling?: 8-15% Reduction, Pre-Pandemic Levels Return Indication

The market is anticipated to contract in 2023–24.

December 16, 2022
Home Lending Falling?: 8-15% Reduction, Pre-Pandemic Levels Return Indication
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Matt Crabtree

Written By

Matt Crabtree


According to UK Finance, which published its prediction in mid-December, the housing market is anticipated to contract in 2023–24 and reach pre-pandemic levels (view paper).

Key Points

  • In order to reach pre-pandemic levels, it is predicted that the overall mortgage market would decline by 15%.
  • A 23% decrease in mortgage financing for house sales is anticipated as a result of the rising rates of interest and the strain that rising living expenses are placing on household budgets. 
  • Landlords who purchase to rent are predicted to have a 27% decline in new borrowing in 2023.
  • In 2013, fewer real estate sales are anticipated, down 21%.
  • Refinancing will increase since a sizable portion of fixed-rate contracts will end in 2023.
  • The lender will assess the individual circumstances of the debtor if they are having problems paying payments and will then provide a deferral that is tailored to meet their needs.

As the economy grows tougher, according to UK Finance, between 2023 and 2024, fewer people would want to buy homes anyway. People are instead focused on rising interest rates and cost-of-living restrictions in the UK economy.

Halifax Predictions, 8% Fall

According to Halifax, a drop in UK home prices of 8% to about £258,000 on average is anticipated this coming year as rising lending rates keep driving up lending rates (Reuters story).

The mortgage lender claimed that after levelling out in the middle of the year in 2022, home values began to decline toward the end of the year, with the negative trend expected to last into 2023.

Based on the most recent UK Home Price Index from the Office for national statistics and Land Registry, average property prices in the UK climbed by 12.6 percentage points over the last year as of October, up from a 9.9% rise in September.

The substantial decline in UK median home prices in October 2021 as a result of increases in stamp duty contributed to the rise in the yearly per cent change.

The average UK home value reached a new all-time high in 2022 as a consequence of consistently rising prices. In October 2022, the average cost of a home in the UK was almost £300,000, up over £30,000 from the same period in 2017.

Britain's average house price rose by 13.2% during the course of 2022, while prices rose by 8.5% in Scotland, 11.8% in Wales, and 10.7% in Northern Ireland.

North Eastern regions maintained their position as the England region with the lowest median home value, with a historic high of almost £170,000 in October 2022.

That same month, the North East, which had the smallest annual home price inflation in September 2022, had the greatest yearly house price inflation. Up from a 6.7% yearly percentage change in September 2022, average house prices in the North East climbed by 17.3% during the year to October 2022.

The North of England saw the biggest rise in median housing values among all areas during September and October 2022, at 1.9%. In comparison, the average price of a home fell significantly by 7.3% in the Northern region over the same timeframe last year.

London had the smallest yearly rate of inflation for housing, with median prices rising 6.7% from October 2022 to that month. This was less than the 7.4% yearly per cent change that was recorded in September 2022.

The average London house price fell by 0.9% between September and October 2022, slowing London's yearly percentage growth. The only area in the UK whose median home prices fell this month was London.

UK Finance Predictions, 15% Fall

Meanwhile, UK Finance predicted a greater restriction. The firm predicts that there will be 21% fewer property investment transactions in 2019 (from around 1.2 to 1 million, for the years 22-23), a 23% loss in the number of homeowner loans, and a 27% drop in landlord lending.

In spite of the anticipated fall in trade, the UK does have strong borrowing and real estate sectors that will continue to be profitable.

1.8 million fixed-rate mortgage agreements are anticipated to finish in 2023 as well, therefore UK Finance anticipates a sizable demand for restructuring.

Because of their financial difficulties, certain borrowers, mainly those in disadvantaged neighbourhoods, may discover that their options for remortgaging on the marketplace are more limited.

Despite this, UK Finance anticipates restructuring to continue active year-over-year given the wide range of internal product swaps that are available. In the years 2019 to 22, product transfers grew by over a dozen billion pounds sterling.

Arrears Growing After Lengthy Lows

Due to the fact that unemployed projections show a very small increase, UK Finance thinks the great majority of property owners will be capable of keeping paying their monthly instalments.

However, any rise in unemployment may add to the pressure on certain people already struggling with rising living expenses and borrowing rates. According to UK Finance, increased mortgage defaults will start to show up in the first half of 2023 and persist through 2024.

According to a forecast from UK Finance, almost 100,000 families, or around a per cent of all existing loans, will have debts by the end of the year. These growing arrears statistics do remain to be small by historical standards.

As older cases make their way through the courts, the number of seizure instances has climbed. According to UK Finance, this tendency will progressively continue over the span of the next two years as the gridlock is relieved.

As was earlier noted in regard to arrears, there has been a little rise in the number of residences being taken in comparison to the time prior to the Covid-19 epidemic.

However, given that arrears are currently at a reduced rate and that there aren't many examples of arrears recorded thus far, UK Finance doesn't really foresee a large rise in the number of possessions owing to either Covid-19 or the current financial issues facing individuals until far into 2024.

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