(Sharecast News) – New mortgage commitments tumbled in the third quarter, official data showed on Tuesday, as higher interest rates weighed on the UK housing market.
According to the Bank of England’s latest Mortgage Lenders and Administrators Statistics, the value of new mortgage commitments – lending agreed to be advanced in the coming months – tumbled 16.5% in the third quarter, to £51.5bn.
Year-on-year commitments were down 41.4%.
The outstanding value of all residential mortgages loans was also lower, by 0.1% on the previous quarter at £1.7trn and by 0.8% on the same three months a year previously.
And the proportion of the total loan balances with arrears relative to outstanding mortgage balances jumped to 1.14% from 1.02%. It is the highest level since the second quarter of 2017.
The value of outstanding mortgage balances with arrears increased by 11.4% on the previous quarter, to £18.8bn, and by 44% year-on-year.
The BoE report came a day UK Finance, the trade association, predicted lending for house purchases would slide 8% in 2024.
It attributed the forecast decline to hikes in both interest rates and household costs, which are making it harder for people to meet affordability criteria.
The BoE has raised interest rates 14 times since December 2021, as it looked to tackle surging inflation. Since August rates have been left unchanged, at 5.25%, but they remain at the highest level since 2008.
Inflation, meanwhile, has come down from last year’s peak of 11.1% but at 4.6% it remains well above the BoE’s 2% target.
The Monetary Policy Committee is widely forecast to leave interest rates unchanged again when it meets later this week. But economists do not expect it to start trimming rates again until well into 2024.
