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Mortgage lending forecast to drop to lowest level since 2016

Written by: John Fitzsimons
More borrowers are predicted to fall into arrears on their mortgage in 2020, with a rise in repossessions expected
Mortgage lending forecast to drop to lowest level since 2016

Gross mortgage lending is forecast to drop to £254bn next year, the lowest figure seen since 2016, according to UK Finance.

The trade body said that gross mortgage lending was likely to come in at around £264bn this year, which is itself a reduction from the £269bn lent in 2018. It is the lowest gross lending figure since £247bn was lent out in 2016.

Of this, lending to homeowners for purchase is predicted to drop from £137bn in 2019 to £134bn, while in buy-to-let it will be unchanged at £10bn.

On the remortgage side, lending to homeowners is forecast to fall from £79bn to £76bn, while landlord lending will drop from £29bn to £26bn.

The trade body said that it expected a “continued moderation” in purchase markets due to “underlying affordability pressures increasingly rippling out from the south east across the country”.

It suggested that purchase activity within the buy-to-let sector would stabilise “as increased demand from incorporated landlords offsets any additional decline in volumes to individuals”, while the remortgage markets would be “constrained by a reduced flow of ‘free-to-move’ fixed rate mortgages coming to the end of their deal period”.

UK Finance has also predicted a sharp fall in the value of product transfers, from the £164bn placed in 2019 to £141bn next year.

In addition, it suggested there will be an increase in arrears, from 74,900 cases to 77,900, and a marginal increase in repossessions from 8,000 to 8,100.

It explained: “With only marginal increases in both unemployment and interest rates over the forecast horizon, arrears and possessions numbers will also remain close to their current historic lows.”

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