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Mortgage lending up in 2022, but have we reached the peak?  

by | Jan 4, 2023

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The latest mortgage market analysis by specialist property lending experts, Octane Capital, estimates that £77.5bn in residential loans was lent to individuals in the final quarter of 2022, totalling £318.3bn for the year – a 0.8% increase on 2021 despite the turbulence seen in the latter stages of 2022 due to increasing interest rates.  

Octane Capital analysed the latest data from the FCA and Bank of England which shows that in Q3 of last year, the gross advances lent via residential loans to individuals hit a high of £85.9bn. This marked a 10.2% quarterly increase and was 17% higher than Q3 of 2021, as well as being the highest quarterly total since Q2 of 2021, as the market continued to move at pace, driven by unrelenting levels of buyer demand.  

However a seventh consecutive base rate hike in September of last year caused a high degree of mortgage market turbulence, as lenders removed a raft of products available to buyers, while also increasing mortgage rates in anticipation of further interest rate increases.  As a result, Octane Capital forecasts that the level of lending seen in the final quarter of last year totalled an estimated £77.5bn.

While this estimate marks a 9.9% drop on the previous quarter it still remains some 10.4% up on an annual basis.  It also means that, despite a string of nine consecutive base rate hikes, total lending for 2022 remains 0.8% higher than the previous year at a total of £318.3bn. 

CEO of Octane Capital, Jonathan Samuels, commented: “Despite a string of consecutive base rate hikes, we continued to see a strong and consistent level of lending in 2022. However, it’s fair to say that turbulence seen at the back end of the third quarter has left its mark and we expect to see total lending drop during the final quarter of the year.  

Despite this, total lending should still sit higher when compared to 2021 but it’s probably fair to say that this will be the market peak, with 2023 likely to bring a slow but steady decline in lending figures – for the first half of the year at least.  However, bond markets like a steady hand and both Sunak and Hunt are believed to provide one, as evidenced by the most recent budget that barely registered a murmur. 

As a result, we’ve already seen Gilts and Swap rates stabilise and we believe this will remain the case throughout next year. While the knock on effect to mortgage rates has been gradual, momentum is building for a steady reduction which should benefit buyers in 2023. So while total lending is likely to drop in the short term, it won’t be the cliff edge that many are predicting.”

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