Mortgage borrowing in Q1 was down compared with the same period the year before, despite growth in mortgage applications at the end of 2023, the latest figures from UK Finance show.
As mortgage rates started to reduce at the end of last year, UK Finance says there was a noticeable uptick in the number of mortgage applications.
It was suggested the market could see a recovery in the first half of 2024 as the applications followed through to completions.
However, UK Finance says any sustained recovery has yet to materialise as market expectations for a base rate reduction shift to later in the year; therefore, borrowing for house purchase in the first quarter was still down compared with Q1 2023.
For those who did secure a mortgage, the trend of borrowing at longer terms to reduce monthly repayments and help with affordability dipped slightly in Q1 but remained high.
Of this, 21% of new first-time buyers (FTBs) extended terms over 35 years.
UK Finance says the trend of longer-term mortgages points to more entrenched affordability issues as costs and house prices remain high relative to incomes.
Affordability constraints are also changing the pattern of re-financing, with external lending falling by 21%compared to Q1 2023.
Data found that internal product transfer continued to be popular, growing 9% year-on-year.
Meanwhile, the number of mortgage customers in arrears grew to 110,150 in Q1 2024, up from 107,250 cases in Q4 2023.
Early arrears cases fell slightly in Q1 2024, indicating any increase in arrears next quarter will again be limited.
There were 1,470 mortgage repossessions in Q1 2024, below pre-pandemic levels.
UK Finance managing director of personal finance Eric Leenders says: “Some households were in a better place financially in Q1 this year, but we are not out of the woods yet.”
“Among the more positive signs, we can see that overdraft and interest-bearing credit card debt are at record lows, and many households have stopped using their savings to help with the rising cost of living.”
“However, we know that this will not be the case across all households, and lenders want to support anyone who might be struggling. Cost of living pressures remain, and with 1.6 million mortgages due to come off fixed rates this year, there may be challenges ahead for some.”
