Property sales to fall 21% next year as mortgage arrears rise

This would see house sales fall from around 1.2mn in 2022 to 1mn in 2023.

Mortgage lending is also expected to fall, due to cost-of-living pressures and rising interest rates placing pressure on affordability.

UK Finance forecasts published today (December 12) predict lending for house purchase mortgages to fall by 23 per cent, in line with the fall in sales.

Any rise in unemployment, coupled with cost of living pressures and interest rate increases, will put further pressure on some households.UK Finance

New lending to buy-to-let landlords is predicted to fall even further, by 27 per cent in 2023.

Lenders have been cutting their interest rates of late, with Halifax making cuts of more than 100 basis points last week.

According to brokers, this is happening in part because lenders need to offer more competitive deals as demand for mortgages slows.

1% of population to be in mortgage arrears

With forecasts for unemployment showing a relatively small increase, the trade association, which represents banks, said it expects “the vast majority” of borrowers to be able to maintain their mortgage payments.

However, any rise in unemployment, coupled with cost of living pressures and interest rate increases, will put further pressure on some households, it said. 

“We expect this pressure will begin to show in rising mortgage arrears from early 2023, increasing through the year and into 2024.”

The number of households to fall into arrears is expected to reach 98,500 next year, representing around 1 per cent of outstanding mortgages.

The Financial Conduct Authority published guidance last week to lenders on the options available to them to avoid customers unnecessarily falling into arrears.

Options include part payment plans, a mortgage term extension and a temporary switch to interest-only and payment concessions, including a zero-payment concession.

£15bn uptick in refinancing

To temper dwindling new lending and house sales, UK Finance said refinancing will increase.

Some 1.8mn borrowers on fixed mortgage rates are expected to remortgage next year, after buying in 2021 to take advantage of the stamp duty holiday.

The trade association said it expects to see around £212bn of product transfers to take place next year, compared with an estimated £197bn in 2022.

"As we look ahead, the mortgage market is expected to enter a period of relative weakness from next year as house prices, the cost-of-living and interest rate pressures put a brake on new demand,” said James Tatch, who heads up principal, data and research at UK Finance.

“The pressures being seen on household finances could mean that some customers have fewer options. However, there is wide availability of product transfers - we would encourage customers to speak to a whole of market mortgage adviser to discuss the options best suited to their circumstances.”

ruby.hinchliffe@ft.com