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UK Finance Household Finance Review Q4 2023

ended 04. March 2024

UK Finance has just published its Q4 2023 Household Finance Review. Full report >> here <<, key points below. Newspage asked brokers for their views, bottom.

  • Household confidence was volatile in the latter half of 2023, with uncertainty as to the direction of travel for the economy feeding through into weak consumer spending figures.
  • Mortgage borrowing was very weak in Q4, as it had been throughout 2023. Despite the welcome downward movement seen in swap rates in the early part of 2024, new mortgage rates remain much higher than in recent years and, combined with cost-of-living pressures, continue to present significant a barrier to mortgage affordability.
  • Forward indicators suggest an uptick in lending in Q1, although from a very low base. Notwithstanding this, we expect another challenging year for the mortgage market, dominated by affordability constraints.
  • The rapid increase seen in borrowing over longer terms levelled off overall but, within this, the proportion at the longest terms is still increasing. Even with stretching to the maximum terms, however, affordability looks to be still out of reach for many who would previously have been able to borrow.
  • External remortgage activity was also weak but internal Product Transfers, where affordability tests are not required, was the only area of growth in activity last year.
  • With cost and rate pressures continuing, households are drawing down on their savings to meet higher expenses. As yet, there is no sign that households are using credit cards or other more expensive unsecured credit to finance higher outgoings.
  • Mortgage arrears rose for the fifth consecutive quarter, in line with expectations. However, the level of arrears remains very low by historic standards. Q1 is likely to show a lower increase, but we still expect continued pressure on mortgage payments through 2024.
  • Possessions numbers were broadly unchanged in Q4 and remain at very low levels. With the backlog of historic cases largely cleared, we expect a return to more normal timelines for those very few arrears cases where possession is, unfortunately, the only available option. Numbers are expected to remain low through this year and next.

11 responses from the Newspage community

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Andrew Montlake
Managing Director at Coreco
The last quarter of 2023 highlighted the deficiencies of the mortgage market, especially where the only growth was in Product Transfers.
Beset by affordability issues where new borrowing and purchases are concerned, leading to low transaction levels, the only bright spot is that mortgage arrears remain mercifully low in historical terms showing that borrowers have a degree of resilience even in challenging times.
The Government has a responsibility now to get this week's Budget right, as the markets are nervous and primed to punish any elementary mistake. Whether the Chancellor can walk this capricious tightrope between sensible economic policy and a desperate attempt for vote winning policies remain to be seen.
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Darryl Dhoffer
Founder at The Mortgage Geezer
When product transfers are the only bright spot, it's a sign that things are broken. The aspirations of buying a home have been dashed for many by the harsh reality of today's interest rates. For many people coming to their end of their mortgages, the product transfer is their only option.
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Hannah Bashford
Director at Model Financial Solutions
It's no surprise that product transfers have seen the highest growth. With more people being squeezed by the cost of living crisis and high interest rates, borrowers have no option but to product transfer. However, the arrears data is interesting and shows how resilient UK borrowers are. I’m seeing lots of people using savings or having parental help to pay down their mortgage to help it become more affordable and reduce their burden.
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Bob Singh
Founder at Chess Mortgages
The figures makes gloomy reading but are nothing unexpected given the brutal financial terrain the economy navigated through in 2023. On the plus side, the uptick in activity indicates renewed confidence in the market as it continues to display resilience in the face of numerous challenges. A good Budget is now needed to set the course for the next few months in particular to stabilise swap rates, which have edged up of late. Can Jeremy Hunt pull it out of the bag for the Tories? We wait with bated breath.
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Rohit Kohli
Director at The Mortgage Stop
There no surprises here whilst, albeit the report do paint a more gloomy picture then I think people are feeling at the moment. We're seeing more enquiries but its no where near levels pre mini-budget. That disaster was always going to take years to recover from. I think alarm bells at the FCA should be ringing at the scale of product transfers in 2023 and if borrowers truley did get the right deal as this feels rather like the energy supplier standard variable rate debacle all over again. The chancellor has an opportunity to reignite the property market on Wednesday but the fact is that his hands are tied as a result of the his shambolic predecessors actions.
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Riz Malik
Independent Financial Adviser at R3 Wealth
This report should serve as a wake-up call to Rishi Sunak and Jeremy Hunt ahead of this week's Budget. Most households are still struggling with the cost of living crisis and the property market is on its knees. This is their last chance to do something meaningful in the few months they have left in office.
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Michelle Lawson
Director at Lawson Financial
The key takeaway here is that the product transfer market was the only performing area. How many people have stayed with their current lender for the 'easy' route rather than it being the 'best' route? How many took advice around this? How much more money could someone have saved by looking at their options? Too many people 'think' they can't do anything and take advice from friends and social media sites.
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Craig Fish
Director at Lodestone Mortgages
There are no surprises here, and its a worrying sign when the only mortgage a client can get is a product transfer. This is hardly in line with Consumer Duty and should serve as a wake up call to Jeremy Hunt, Rishi Sunak and the Monetary Policy Commitee. Things need to change as people are struggling.
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Charles Breen
Founder at C B
Two words: mortgage mayhem. The unforgiving tide of the cost of living crisis and mortgage rate increases has backed people into a corner. People who were living quiet comfortably not so long ago are now living beyond their means. This is why we are seeing more product transfers and affordability rates decreasing.
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Gary Bush
Financial Adviser at MortgageShop.com
These final figures of activity in 2023 in the Household Finance Review just enhance the fact that the UK suffered greatly last year and that, unless careful, 2024 could well follow down that same rabbit hole. On seeing the confirmation, which we knew from our customer activities, that people were being forced to draw down their savings to help make ends meet should be a warning to the government and the Bank of England that the cupboard is becoming bare. The fact that, through extreme caution, financial advisers are adopting mortgage product transfers rather than remortgaging to other lenders also enhances the worry that the market is in a bad way and lenders have become unreliable to predict. It's clear to us that the inflationary data, to be released on 12th March will be ultra important for the upcoming monetary policy meeting. Much crossing of fingers for next week's CPI announcement.
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Amit Patel
Adviser at Trinity Finance
Jeremy Hunt will have one last roll of the dice when he announces his budget on Wednesday.

The stark reality is the nation faces a choice in 2024 “stability and a strong Government with Labour, or chaos with Rishi Sunak”.

The ramifications of the Kwarteng/Truss budget are still being felt today and will be for years to come. Its been one fine mess after another.