Mortgage lending and household savings continue to grow

After returning to annual growth in the second quarter, mortgage lending rose again in the third quarter of this year (Q3), increasing by 15 per cent year-on-year.

Mortgage activity throughout 2024 has been very sensitive to changes in product pricing. In the third quarter, as lenders were able to reduce prices further, we saw application volumes increase. This points to further lending growth in the final quarter of 2024.

While affordability challenges have eased over the course of the year, they continued to impact both homebuyers and those looking to remortgage.

Internal product transfers, where an affordability assessment is not needed, remain popular and accounted for 83 per cent of all refinancing in Q3.

For first time buyers, despite the downward movement in rates this year, other factors including rising house prices are pushing affordability metrics back towards levels seen late last year, as show in the chart below:

Proportion of new FTB loans where monthly payments exceed 30 per cent of gross income

Mortgage arrears, possessions, and the help available

As previously reported, the number of mortgages in arrears fell by three per cent to 106,630. Early arrears cases also fell again, suggesting we’ll see a further fall in total arrears numbers in Q4.

There were 1,700 mortgage repossessions in Q3, unchanged from Q2 and still substantially below pre-pandemic levels. The courts continue to work through their backlog of historic long-term cases from before the pandemic.

Responsible lending policies mean that relatively few households will fall into arrears, and possession is only ever a last resort. For anyone concerned about paying their mortgage, please contact your lender as soon as possible to discuss the help available.

Consumer saving, spending and borrowing

As cost-of-living pressures gradually ease, households are able to save more and, even with cuts to the Bank Rate this year, there remain attractive rates of return in the savings market.

Household savings increased again in Q3, with growth being driven by deposits in notice accounts. A total of £268.4 billion is now held by high street banks in notice accounts, up 8.5 per cent since the end of 2023.

Personal account deposit levels

Meanwhile, overdraft debt remained broadly flat through the quarter and outstanding credit card debt increased, albeit at broadly trend levels.

Eric Leenders, Managing Director of Personal Finance, said, “We are seeing more signs that the cost-of-living pressures bearing down on households are beginning to ease, with mortgage lending and savings both increasing during the quarter. Notice accounts have proved popular for those households able to save more of their money.

“Although the challenges facing households are far from over, the picture that’s emerging from our data is one of gradual improvement. We know this will not be the case for all households though and I’d encourage anyone who might be struggling to reach out to their lender for support.”