Credit Set to be More Selective as lenders’ worries rise - new stats

New Financial Conduct Authority statistics display housing market turbulence over the past two years, raising concerns about buyers and lenders in 2024.

Conveyancing solicitors Bird & Co examined the FCA figures and says that while they had previously exhibited relative stability year on year, they’ve seen dramatic changes in recent years..

These include: 

• House purchase loan advances rose steadily from 2018 to 2021, then declined by 8% in 2021-22 and 5% in 2022-23;
• Remortgages experienced a notable 57% increase in 2022-23, marking the largest change in five years;
• Interest loans to individuals with impaired credit histories decreased by 4% between 2022-23, contrasting with a 9% increase the previous year;
• The value of loans in arrears doubled from 2022 to 2023, reaching over £51m;
• Single income loans saw a significant 10% decrease in 2022-23, the most substantial change since 2018;
• First-time buyer advances surged by 10% between 2022 and 2023, consistently surpassing quarterly averages by 29 to 36%;
• Buy-to-let advances consistently lagged behind the average by 21-38% each quarter, plummeting by 37% overall in 2022-23, compared to a 10% rise the previous year.

Bird & Co says the statistics reflect the ongoing challenges stemming from the cost-of-living crisis that many homeowners and prospective buyers currently face, in more ways than one.

For starters, the value of loans in arrears doubling from 2022-23 paints a huge picture of adversity for the UK population. Total mortgage debt in 2023 reached £51m, a figure that has reached no more than £30m in the previous five years.

There has also been a dramatic increase in the value borrowed for remortgaging. Released equity can be utilised for home improvements, debt consolidation, or funding significant expenses like education or cost of living. This increase, coupled with a decline in the value lent for advance loans, suggests homeowners are being cautious with their finances, opting to shop around for better interest rates and secure more affordable payments.

As for prospective buyers, mounting challenges in securing mortgage loans are evident, particularly for single-income earners or those with impaired credit histories. This indicates a trend of lenders becoming increasingly risk-averse, tightening their lending criteria and favouring joint loan mortgage applications.

Finally, the stark decline in prospects for buy-to-let ventures reflects a lack of confidence in the housing market as a business venture for many, with buy-to-let advances declining year on year.

Overall, these statistics underscore the significant changes and worsening conditions within the property market, making financing more challenging for various segments of the population compared to previous years.

Daniel Chard, partner at Bird & Co, says: "The fluctuations in house purchase loan advances, particularly the decline in recent years, signify a notable shift in borrower behaviour and market conditions. The surge in remortgages suggests homeowners are cautiously tapping into the benefits of home equity, whether for debt consolidation or to invest further - and they aren’t afraid to switch lenders to get the best deal possible given the drop in home loan advances.

“That said, the concerning trend of buy-to-let advances consistently lagging behind the average raises questions about the attractiveness of property investment in current economic circumstances. These trends could exacerbate difficulties for future borrowers, as they navigate a process where access to credit becomes increasingly selective, impacting their ability to secure loans and fulfil their property aspirations.”