Mortgage borrowing in Q1 was down compared with the same period the year before, despite growth in mortgage applications at the end of 2023, UK Finance’s Household Finance Review has revealed.
For those who did secure a mortgage in Q1, the trend of borrowing at longer terms to reduce monthly repayments and help with affordability dipped slightly, but remained high, with 21% of new first-time buyers (FTBs) extending terms over 35 years.
Affordability constraints continued to change the pattern of refinancing, with external lending falling 21% compared to Q1 2023.
Internal product transfers, where an affordability assessment is not needed, stayed popular, growing 9% year-on-year.
The data also showed weak spending activity in Q1, particularly for household goods, but spending on travel rose at the start of the year.
UK Finance saw a reverse to the fall in savings levels seen over 2023 during which households ran down their savings to help pay for day-to-day expenses.
This increase in saving levels was likely driven by rising wages covering higher outgoings.
For those able to put money into savings, the increase in deposits in notice accounts and cash ISAs continued in Q1 2024 to over £250bn in March.
Overdraft debt continued to fall back in Q1 2024, and by March was at its lowest level since August 1998, at £4.67bn outstanding.
Credit card debt was 10% higher than in Q1 2023, in line with a broadly constant annual growth rate since the end of the pandemic.
Within overall card debt, 50% was interest-bearing in Q1 2024, a record low proportion since 1995, as consumers pay down their balances and manage their interest through balance transfers.
The number of mortgage customers in arrears grew to 110,150 in Q1 2024, but the rate of growth was modest – up from 107,250 cases in Q4 2023.
Early arrears cases fell slightly in Q1 2024, indicating that any increase in arrears next quarter will again be limited.
There were 1,470 mortgage repossessions in Q1 2024, below pre-pandemic levels.
Eric Leenders, managing director of personal finance at UK Finance, said: “Some households were in a better place financially in Q1 this year, but we are not out of the woods yet.
“Among the more positive signs, we can see that overdraft and interest-bearing credit card debt are at record lows, and many households have stopped using their savings to help with the rising cost of living.
“However, we know that this will not be the case across all households, and lenders want to support anyone who might be struggling.
“Cost of living pressures remain, and with 1.6 million mortgages due to come off fixed rates this year, there may be challenges ahead for some.
“If you are worried about your finances, your lender has help available – please contact them as soon as possible to discuss your options.”
