Mortgage lending set to fall to lowest growth since 2011

This comes from EY Item Club, a leading forecasting body.

EY believe that a fall in demand will be exacerbated by banks strengthening their lending criteria amid higher interest rates, a weak economic outlook and falling house prices.

EY expect demand for houses to pick up slightly in 2024.

After net mortgage lending growth of 4.1% in 2022, the EY Item Club predicts growth will fall significantly this year to just 0.4% (equating to net lending growth of £6.5bn). This would be the weakest growth since just after the financial crisis. This forecast is against a backdrop of real incomes continuing to fall while house prices remain high.

With inflation set to fall back throughout 2023 and the Bank of England predicted to cut interest rates around the end of the year heading into 2024, affordability should start to improve and boost the outlook for the housing market.

They forecast net mortgage lending to rise 1.4% in 2024 (equating to a £23bn increase) and 2.4% (a £40bn increase) in 2025, consecutive more positive outlooks.  

EY believe that a fall in demand will be exacerbated by banks strengthening their lending criteria amid higher interest rates, a weak economic outlook and falling house prices.

EY expect demand for houses to pick up slightly in 2024.

Dan Cooper, UK Head of Banking and Capital Markets at EY, comments: “With more than 70% of corporate bank loans on variable rates, UK businesses are likely to be affected in the short term by increases in interest rates.

“On a more positive note, many small businesses that took on debt during the pandemic are currently on low interest, fixed rate government-guaranteed loan schemes, which will help them manage their repayments. Corporate balance sheets across the board have also strengthened as stresses associated with the pandemic have eased.”