UK mortgage lending is anticipated to file decade-low progress in 2023 and 2024, an financial forecaster is predicting.
Total, mortgage loans in 2023 are anticipated to rise simply 1.5% internet and a pair of% internet in 2024, representing the bottom progress over a two-year interval in a decade, in response to the EY ITEM Membership Outlook for Monetary Providers.
It pointed to excessive mortgage charges, subdued financial progress and weakening housing market sentiment.
The EY ITEM Membership expects mortgage demand to choose up over 2024 and 2025 – offered inflation continues to fall, the Financial institution of England cuts rates of interest subsequent 12 months, and housing affordability improves. Total, mortgage lending is forecast to develop by 2.8% in 2025.
These figures stay very low in historic phrases and sit far beneath the three% averaged in the course of the pre-pandemic years of 2015 to 2019, the report mentioned.
In addition to sustained headwinds within the UK economic system, the forecaster additionally mentioned that developments within the Center East and the continuing warfare in Ukraine current an ongoing draw back danger to the forecast, with a really actual potential of additional falls in shopper and enterprise confidence and urge for food to borrow, a minimum of within the short-term.
Anna Anthony, UK monetary providers managing companion at EY mentioned: “The UK remains to be on observe to keep away from recession this 12 months, however the financial atmosphere stays difficult.
“Important cost-of-living pressures proceed to have an effect on households’ potential to spend, and an rising quantity are discovering it tough to maintain up with mortgage repayments.
“On the similar time, companies’ urge for food to borrow and make investments has been affected by excessive borrowing charges. This slowdown within the move of capital is being felt throughout the nation; from people pulling again on day by day bills and laying aside home-buying plans, via to banks and asset managers managing low progress portfolios.
“Escalating geopolitical tensions world wide are one other trigger for concern, and it will likely be prudent for monetary establishments to be ready for additional dips in shopper and enterprise confidence, and to make sure they’re doing all they’ll to assist clients via these difficult instances.”
Taking a look at shopper credit score, internet non-mortgage lending is forecast to rise by 6.1% in 2023, which might be the strongest progress since 2017, partially pushed by a fall in repayments in current months.
The EY ITEM Membership predicts non-mortgage borrowing lending progress will sluggish to five% in 2024 and 4.3% in 2025.
Write-off charges on shopper loans haven’t but been considerably affected by greater rates of interest or a subdued economic system, the report mentioned.
Financial institution-to-business lending is forecast to contract by 0.5% internet this 12 months, as financial challenges and excessive borrowing prices dampen companies’ appetites to borrow.
Progress is forecast to return in 2024 at 1.8%, and the EY ITEM Membership expects a bigger rise of three.7% in 2025 because the financial local weather is anticipated to enhance.
Dan Cooper, UK head of banking and capital markets at EY mentioned: “The ‘greater for longer’ borrowing charges and ongoing cost-of-living pressures are persevering with to have a really actual influence on clients, and on the similar time, banks are tightening their lending standards.
“Corporations are additionally watching impairment ranges intently, notably as fixed-rate mortgages roll onto greater rates of interest.
“Nevertheless, the mixture of tighter regulation imposed post-2008, further assist from lenders, and family financial savings constructed up in the course of the pandemic ought to assist maintain defaults to a minimal.
“Banks are actively working to retain a robust capital place and assist their clients on this difficult market.
“With rates of interest now anticipated to peak at a decrease degree than beforehand predicted, we must always see a gradual enchancment in shopper and enterprise confidence over the following two years, resulting in better urge for food to borrow.”