Mortgage lending to fall in 2024 with more households in arrears, bank body warns
Mortgage lending is set to fall in 2024, with repossessions and the number of households in arrears to increase, according to a forecast by a lenders’ trade body.
UK Finance said while affordability pressures were peaking – largely reflecting the end of the Bank of England‘s cycle of interest rate hikes to tackle inflation – the situation is unlikely to improve markedly until 2025.
It cited the continued pressure on household budgets from the wider cost of living crisis and the fact mortgage rates remain high compared to post financial crisis levels.
The Bank itself warned last week five million more households – roughly half – are yet to feel the burden of interest rate rises on their mortgage.
Data from Moneyfacts on Friday showed the average two-year fixed rate residential mortgage slipped below 6% for the first time in six months.
The five-year figure was 5.6%.
The financial information service said there are a growing number of two-year deals on offer below 5%, which could help stoke demand for lending and help bring the averages down further in the months to come.
However, those declines are widely expected to be limited due to the fact the Bank of England is not expected to start cutting borrowing costs any time soon.
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‘People are waiting for mortgage rates to drop’
Financial markets currently see a prospect for the first interest rate cut, from the current level of 5.25%, in the third quarter of next year.
Bank governor Andrew Bailey has repeatedly warned Bank rate will remain higher for longer due to continued inflation threats.
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BoE: Inflation is ‘still too high’
UK Finance forecast that mortgage arrears – those behind by over 2.5% of their outstanding balance – would rise from 105,600 cases by the end of this year, to 128,000 in 2024.
The trade body said repossessions, while remaining “incredibly low” by historic comparisons, would go up from 4,400 this year to around 5,100 next year.
The report said: “With a continuing favourable labour market, extensive lender forbearance and gradually improving affordability, the vast majority of customers now falling behind will eventually recover their positions. The very small minority of cases where this is not possible will not feed through into any material increase in possessions over our forecast period.”
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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 purchase 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.”
He added: “Although we forecast more customers will encounter arrears next year, we expect numbers to peak well below levels seen previously.
“As always, any customers who do find themselves in difficulty should speak to their lender at an early stage, as the industry continues to provide help to anyone struggling with a range of tailored support options.”
The crash involving a cargo ship and oil tanker off the East Yorkshire coast is bad news for the sea, fish and air in the area. What we don’t know yet is quite how bad it will be.
That depends on a few things – but the speed of the collision, clouds of filthy black smoke from the fires and the leaked fuel are certainly worrying.
Firstly, it matters what was on board those two massive vessels.
Follow live: Jet fuel spilling into sea after tanker collision
Analytics firm Vortexa estimates the 183m-long tanker was carrying about 130,000 barrels of jet fuel (kerosene), which is now leaking into the sea.
Jet fuel is not as sticky or viscous as heavier types of oil, thankfully, so it’s less likely to clog the feathers and fur of birds and seals. It can also be broken down by natural bacteria.
But it can still poison fish and kill animals and plants on the shoreline if it makes its way into the soil there.
The Marine Conservation Society has pointed out the site in the Humber estuary is close to some protected areas and is important for seabirds and harbour porpoises.
And both ships will have been powered by a dirtier, heavier kind of oil – likely marine gas oil or heavy fuel oil, though we don’t know the details yet.
Heavy fuel oil is nasty stuff.
Pic: Bartek Smialek/PA
Cheap, thick and tar-like, it can smother animals and is very dangerous if they consume it, and is extremely difficult to clean up. Let’s hope this isn’t creeping around the North Sea already.
We don’t know how much of either the jet fuel or the oil powering the ships has leaked, or how much will be burned off in the violent fires – which themselves are ploughing black smoke and filthy air pollution into the surrounding atmosphere.
And we don’t know for sure what was on the Solong cargo ship and if, or what, will go into the sea.
Cargo ship ‘had sodium cyanide on board’
It was carrying 15 containers of sodium cyanide among other cargo, according to a report from maritime data provider Lloyd’s List Intelligence.
The container vessel was also transporting an unknown quantity of alcohol, said the casualty report – an assessment of incidents at sea – citing a message from the local coastguard.
Plastic takes hundreds of years to break down, and potentially can choke or trap animals.
Many of us have seen that uncomfortable viral video of a turtle having a straw yanked out of its nose. Previous accidents on cargo ships have seen plastic Lego pieces wash up in Cornwall 25 years later.
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Secondly, the impact depends on the sea and weather conditions around it.
Things like the wind and currents affect how an oil spill spreads in the sea. Scientists can draw up computer models to simulate how the oil could behave.
Thirdly, it matters how quickly this is all tackled and then cleaned up, if necessary, and if it can be.
Usually the slower the response, the worse the impact.
The coastguard has said the incident “remains ongoing” and it has started assessing the “likely counter pollution response” that will be required.
Such a response might need the help of numerous public bodies: the government environment department, the transport department, the Environment Agency and the Maritime and Coastguard Agency.
So for now the best we can hope for – aside from the welfare of the people involved – is that not all the oil is spilled or burnt, that conditions are calm and that rescuers and those cleaning up can work swiftly.
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