Mortgage lending to fall further in 2024

Mortgage lending is predicted to fall by 8% in 2024 with remortgaging activity expected to also be affected, according to a new report by UK Finance.

The outlook for 2024 will continue to be challenging for homeowner with millions facing affordability pressures.

UK Finance says that this will lead to a higher number of repossessions throughout next year with arrears set to increase to 128,800 by the end of 2024. Repossessions will also grow by around 16 per cent to 5,100, but this is still a lower figure than in any year from 1981 to 2019 thanks in part to the Mortgage Charter agreed between the government, lenders, and the Bank of England.

However, there does seem to be a ray of light on the horizon, with the report setting out things will start to improve in 2025.

James Tatch, Head of Analytics at UK Finance, said: “2023 was a challenging year for both prospective and existing mortgage borrowers, facing affordability pressures from higher interest rates and the increased cost-of-living, as well as house prices still at elevated levels relative to income. In the face of these challenges, borrowing for house purchases has been constrained. At the same time most existing customers looking to refinance their loans chose to take a product transfer with their current lender, where affordability tests are not required.

“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.

“The challenging environment has also pushed more households into mortgage arrears. However, the rigorous affordability tests in place since 2014 are now working to ensure that the vast majority of customers can still afford their mortgage payments even with the increased pressure on their finances.”

UK Finance advises anyone who finds themselves in difficulty to speak to their lender at an early stage as there is help and support available.

What happens if you miss a mortgage repayment?

If you miss two or more monthly mortgage repayments, you’re officially in arrears.

Your lender must make reasonable attempts to reach an agreement with you.

It’s crucial that you contact your lender if you’re struggling – the earlier the better. Don’t bury your head in the sand. Mortgage lenders are used to advising people who can’t afford repayments and have trained staff on hand to help.

What must your lender do?

Within 15 working days of falling into arrears, your lender must:

• tell you how much your arrears add up to
• list the missed payments
• say how much is outstanding on your mortgage
• state any additional charges that have been added to the amount you owe

Your lender must then consider any suggestions you make that could help you get back on track e.g. making lower payments for a while. They may also look at:

• switching you to an interest-only mortgage
• extending the term of your mortgage
• giving you a payment holiday
• helping you to sell your home so that you can repay your mortgage
• the government support available to help you pay your mortgage

Missed or reduced mortgage payments may be recorded on your credit file. This may make it harder for you to borrow.

Could I lose my home?

You may decide to sell your home if you can’t afford to make the repayments owed. In extreme circumstances, your lender could take court action to repossess it.

Repossessions are far rarer than they used to be.

There are lots of steps a lender needs to take before repossession. The whole process usually takes around two years.

If you’re struggling with your mortgage payments, get in touch with us for free independent debt help.

What’s the mortgage charter and how can it protect your home?

The UK’s largest mortgage lenders and the Financial Conduct Authority agreed with the government a set of standards that support homeowners with higher interest rates.

The charter sets out:

• Anyone worried about their mortgage repayments can contact their lender for help and guidance, without any impact on their credit file.
• Customers who are up to date with their payments can switch to a new mortgage deal at the end of their existing fixed rate deal without another affordability check.
• Lenders must provide well-timed information to help customers plan ahead should their current rate be due to end.
• Lenders must also offer tailored support to anyone struggling. This could mean extending their term to reduce their payments or offering a switch to interest only payments. They should also offer a range of other options such as temporary payment deferral or part interest-part repayment.
• Borrowers will not be forced to leave their home without their consent- unless in exceptional circumstances - in less than a year from their first missed payment.
• Homeowners approaching the end of a fixed rate deal will have the opportunity to lock in a deal up to six months ahead of it expiring. They’re also able to manage their new deal and request a better like for like deal with their lender right up until their new term starts.
• If a homeowner is on universal credit, they will receive help with mortgage interest payments after three months from the DWP.