Borrowing for house purchases was down nearly a third in Q2 of this year compared to the same period in 2022, new figures from UK Finance reveal.
First-time buyer purchases and home mover purchases were down 28% and 30% respectively on Q2 2022.
The figures were revealed in its latest Household Finance Review Q2 2023, which explores trends in household spending, saving and borrowing.
UK Finance says uncertainty in the market and affordability issues combined with higher interest rates and increased costs of living means it has been harder for some borrowers to meet regulatory affordability tests.
It adds borrowers who have refinanced internally at the end of a fixed-rate deal are doing so within the stress-test level applied to their original application.
Throughout 2022, it says it saw a rapid increase in the proportion of mortgage customers borrowing over a longer term in order to stretch their affordability.
UK Finance also saw typical income multiples and average loan-to-values start to fall back, favouring those with higher incomes and/or larger deposits.
Meanwhile, affordability constraints impacted some external remortgaging activity and resulted in internal product transfers being more popular.
In Q2, a massive 84% of remortgaging deals were internal product transfers.
Product transfers in April hit a record monthly high of 88%– by comparison the average for 2022 as a whole was around 77%.
Mortgage arrears rose in line with expectations, although UK Finance says the total level of arrears remains low by historic standards.
Meanwhile, borrowing through personal loans totalled £4.7bn, up slightly from £4.6bn the previous quarter.
Credit card debt is around 11% below its pre-pandemic peak, while the average spend has increased due to inflation.
Households continued to dip into their savings in Q2, resulting in deposits being around 2% lower at the end of June compared with the year before.
UK Finance managing director of personal finance Eric Leenders says: “Whilst the cost-of-living challenges have created acute hardship for many, we have also seen that other consumers were largely able to pay off their credit card bills and meet their monthly mortgage payments.
“Some have been dipping into their savings to help to pay the bills, whereas some of those with savings have moved their money to accounts with higher rates to maximise their income.
“Around 700,000 borrowers have come off their fixed rate deal in the first half of this year and likely found themselves on a much higher rate, which continue to be largely affordable because of the “stress tests” applied when the mortgage was originally taken out.
“But circumstances can change, so if anyone is struggling with their mortgage payments, they should reach out to their lender who will have a range of tailored support available to help.”
UK Finance has also released its Later Life Lending for Q2 2023, which shows that 30,400 new loans were advanced to older borrowers in Q2, down 38.5% year on year.
The value of this lending was £4.3 bn, down 45.7% compared with the same period in the previous year.
