Gross mortgage loans are predicted to fall 5% to £215bn in 2024, says the banking trade body’s mortgage market forecast, adding that next will be characterised by “continuing challenges in the mortgage market”.  

In 2024 it adds that:  

• Lending for house purchases will fall by 8% to £120bn  
• External remortgaging activity will fall by 8% to £60bn  
• Internal product transfers to fall by 8% to £202bn  
• Buy-to-let purchase lending to fall by 13% to £7bn  
• Arrears to rise to 128,800 cases   
• Possessions to rise by 16% to 5,100, which would be lower than in any year from 2019 to 1981  

The trade body says that even though the “main pressures on affordability look to be peaking,” the level of house prices and interest rates “will continue to weigh heavily” in 2024.  

Its report points out that lenders competed to retain customers against a backdrop of weak new lending volumes this year.   

This saw more customers take out new product transfer deals with their existing lender, which are not subject to affordability tests.   

The product transfer market grew by 11% to £219bn in 2023.   

In 2024, the association forecasts that external remortgaging and product transfers “will fall away slightly, following a peak in maturing two-year fixed-rate deals in 2023”.  

The study adds that a mixture of cost, rate, tax and regulatory pressures hit the BTL market last year.  

It says: “The cumulative effect of these factors has meant that BTL lending has experienced a sharper contraction than the residential market.   

“New BTL house purchase lending fell by 53% in 2023, and remortgaging by 47%.   

“Next year, we forecast a smaller contraction but the greater challenges for BTL investors remain, particularly for smaller-scale landlords who are less able to spread costs across their portfolios.”  

The trade body says that household cost-of-living and pressures continued throughout 2023, which led to 105,600 households falling into arrears, a jump of 30% compared with December 2022.   

The report says: “In 2024, although no significant increase in the Bank of England rate is expected [currently at 5.25%], the existing pressure on payments will persist, and we forecast arrears will rise to 128,800 by the end of 2024.   

“In 2025, we predict arrears will rise more modestly to 137,800 cases, as the pressure on mortgage payments begins to recede.”  

UK Finance head of analytics James Tatch says: “With these pressures unlikely to ease significantly in the short term, we expect lending to remain weak in 2024, with a gradual improvement in affordability reflected in a modest increase in activity levels in 2025.”  

Target managing director Katie Pender adds: “It will be interesting to see too whether borrowers will start to feel more confident now that mortgage interest rates are falling.   

“With a general election likely next year though, borrowers will need to feel confident in the stability of the market after what has been a rocky period.”