Mortgage lending in the UK will likely rise 4% this year but will soon slow to growth of just 0.7% in 2023, says EY.

This would be the lowest growth rate – valued at £11bn – for this metric since 2011, says the forecast. The firm places the blame on rising mortgage rates and a drop in household income.

It adds that the issue will be compounded by banks tightening their lending criteria, something the Bank of England’s latest credit survey highlighted earlier this month.

This year’s 4% growth rate, EY says, can be put down to borrowers wanting to secure fixed rates in the face of the worsening economic situation.

By 2024, the report adds, the growth rate for mortgage lending will rise to 1.4%.

EY UK Financial Services managing partner Anna Anthony says: “Geopolitics and the worsening economic environment are having a significant impact on households and businesses. While interest rates are still fairly low by historic standards, they are the highest they’ve been in a decade and are set to rise further.

“This will put further pressure on already-strained finances and will have a knock-on effect on demand for most forms of bank lending next year, as potential homeowners postpone purchases and businesses pause investment.

“Affordability is stretched and mortgage and business lending are likely to slow to a rate similar to that seen post-financial crisis. The key difference now is that tighter regulation and higher solvency levels mean banks are well capitalised and far more able to support customers through this challenging period.

“Another crucial difference is that many consumers are entering this period with a financial cushion in the form of savings built up during the pandemic.”