Next year will see overall mortgage lending drop 15%, says UK Finance in its forecast for 2023 and 2024.

This means a fall in gross mortgage lending from £322bn to £275bn in 2022 and to £253bn in 2024.

Within this total, the value of residential lending is expected to drop from £171bn to £131bn next year, then to £122bn in 2024. And for buy-to-let (BTL), from £18bn to £13bn to £11bn across the same time frame.

However, the trade body also believes that the value of residential remortgages will increase form £82bn in 2022 to £89bn in 2023, with this then dropping to £81bn in 2024.

The BTL sector will, meanwhile, see remortgage value fall from £38bn to £30bn and then £28bn across the same time frame.

UK Finance adds that the number of residential property transactions will decrease by 21% next year, from 1.27 million to just over 1 million, falling further in 2024 to just under 1 million.

Possessions and arrears figures are also expected to go up. Here, total first charge mortgages in arrears of over 2.5% of the outstanding balance is expected to rise from 80,100 to 98,500 next year and then 110,300 in 2024.

And the number of properties taken into possession, which stood at 4,100 this year, will likely rise to 7,300 next year and then 9,700 the year after that.

UK Finance principle of data and research James Tatch says: “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.

“The high level of activity during the 2021 Stamp Duty holiday means that a large number of borrowers are due to refinance next year, pushing up the expected value of refinancing in 2023.

“The pressures being seen on household finances could mean that some customers have fewer options.”

And Just Mortgages national operations director John Phillips comments: “[Next year] will, without question be a year for brokers to be proactive and it will very much be a case of getting out what you put in.

“Mortgage brokers have dealt with far worse economic environments and come out the other side. We need to help borrowers accept that rates of 4% and 5% are the new normal and household budgets should be adjusted accordingly. Brokers are in a very privileged position to be able to help people buy or keep their homes and good products still exist and let’s remember that lenders still want to lend.

“Diversification will be the watch word for brokers in 2023 and they should look to become proactive in all lending sectors even those they have not targeted previously such as equity release, commercial and overseas mortgages.

“There is also an untapped income for many brokers by simply ensuring that their existing and new clients have the appropriate protection needs met.

“[Next year] can be a year of opportunity for brokers; they just need to seize it.”