Mortgage lending plummeted to its lowest level since Spring 2020 (when the housing market was effectively shut due to lockdown) in the first quarter of this year.

Excluding that first Covid lockdown, first-time buyer numbers were the lowest since 2015 and home mover numbers were the lowest since 2009, said UK Finance.

This drop in lending activity comes as cost-of-living and interest rate increases tighten affordability limits, bearing down on demand for new mortgages and stopping existing homeowners borrowing more, said the trade association.

At the same time, the proportion of first-time buyers taking out a mortgage with a term of over 35 years hit a record high in March at 19 per cent.

Arrears up

Mortgage arrears rose in the first quarter of 2023, said UK Finance, from a very low base. At the end of
March there were 83,760 mortgages in arrears, up from 81,230 in Q4 2022.

The association said remortgaging rate shock ‘does not appear to be driving arrears for customers on fixed rates’. Rather, it is cost-of-living pressures that are affecting these customers’ ability to pay.

It added that lenders need to have a flexible tailored approach to supporting borrowers.