Mortgages will slow to 2011 levels in 2023: EY

UK mortgages are likely to grow by 4% this year, but will soon slow to growth of just 0.7% in 2023, according to EY.

It would be the lowest growth rate – valued at £11bn – for this metric since 2011, according to forecasts. The company blames rising mortgage rates and falling household incomes.

He adds that the problem will be made worse by banks tightening lending standards, which the Bank of England’s latest credit survey highlighted earlier this month.

The 4% growth rate this year, according to EY, can be attributed to borrowers wanting fixed rates in the face of deteriorating economic conditions.

By 2024, the report adds, the mortgage growth rate will reach 1.4%.

Anna Anthony, Managing Partner of EY UK Financial Services, said: “Geopolitics and the deteriorating economic environment are having a significant impact on households and businesses. While interest rates are still quite low by historical standards, they are the highest they have been in a decade and are expected to rise further.

“This will put further pressure on already strained finances and have a knock-on effect on demand for most forms of bank loans next year as potential homeowners postpone purchases and businesses suspend investment.

“Affordability is tight and mortgage and business lending is expected to slow at a pace similar to that seen after the financial crisis. The main difference now is that tighter regulation and higher solvency levels mean banks are well capitalized and much more capable of supporting customers through this difficult time.

“Another crucial difference is that many consumers enter this period with a financial cushion in the form of savings accumulated during the pandemic.”

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