Mortgage lending dips for the first time in a decade

New figures released by UK Finance have shown that gross mortgage lending dipped for the first time in almost a decade last year. Lending dropped from £268.7 billion in 2018 to £267.6 billion in 2019 was only 0.4 per cent, it was the first annual decline since 2010.

The Household Finance Review for Q4, 2019 has revealed that although modest in size, 2019 saw the first annual fall in gross mortgage lending since 2010. Purchase activity across the country was limited by affordability issues.

However, new homeowners in Northern Ireland and Yorkshire & Humberside, as well as home movers in Scotland, have benefited from relative affordability advantages. The data also highlights that the buy-to-let market, whilst still contracting, is levelling off with some growth in the north. Finally, credit card borrowing continues to decline and is at its lowest point since 2013.

The total number of mortgage advanced over the year, excluding internal product transfers was down by nearly 2 per cent to 1.39m. First-time buyer numbers were down by 0.6 per cent year on year to 351,000 after reaching a 10-year peak of 353,000 in 2018.

UK Finance Managing Director Eric Leenders said: “Last year saw a slight fall in levels of mortgage activity for home purchases, largely driven by increasing affordability pressures. Meanwhile, the remortgage market remains competitive, although the shrinking number of customers coming to the end of their fixed-rate deals will start to impact volumes in this segment.”

Jonathan Sealey, Hope Capital’s CEO, said  “Over the past few months it has felt as though we were experiencing a real sea change in the market as the political arena became less of a focus.  We have definitely seen the busiest start to any year so far as people started looking forward to a more stable environment.  Unfortunately, that may well be up in the air again as nervousness surrounding the COVID-19 outbreak takes hold.  Nonetheless, the country has shown that despite everything we are a resilient lot.  The market held it’s own in 2019 and that’s not something that many would have predicted at the beginning of the year.”
John Goodall, CEO and Co-founder of buy-to-let specialist Landbay, said: “A fall in new mortgage lending is disappointing news for the housing market, but those hoping to see the much-anticipated ‘Boris Bounce’ must wait a little longer. We won’t see the impact of any change in decision-making in January until around April, when purchases complete; all eyes will be on the lending levels in Q2 to see whether the decisive election victory has actually impacted sentiment.”

“But the hard truth is that housing supply is limited, and more homes need to be built to quench the demand of buyers and renters alike. With Esther McVey losing her position in the reshuffle, Christopher Pincher becomes the tenth person to hold the job in the last decade, and the nineteenth since 2000. The market is calling out for consistency and stability, and the upcoming Budget is a chance to address some of the challenges facing the sector. Brexit negotiations rumble on, but now is the time for domestic policies to be brought to the top of the agenda.”

Meanwhile, Richard Pike, Phoebus Software Sales and Marketing director, said “The new report from UK Finance, in all its detail, is basically telling us that the first two months of 2020 have bucked the trend from 2019.  Although there were ups and downs throughout the year the overall figure shows activity was at its lowest since 2010.  There were many overriding factors last year but, thankfully, many of those have now been negated.  The question now has to be, what will be thrown at us for the rest of this year?  We’ve started the year well but there is one black cloud that is hard to ignore, and it is one that is already having an effect on the world’s economy.  How the Coronavirus effect will translate down the line into the housing market is anyone’s guess, but it is unlikely to have no effect at all.”