Report Summary
The cost of living crisis was driven by high inflation, leading the Bank of England to raise interest rates to their highest level since 2008 in response. This has severely increased the cost of borrowing and hit gross mortgage lending. Besides reducing affordability for potential new buyers, it has led to a surge in remortgaging activity as fixed-rate deals expire and households look to minimise the impact of rising costs.
- UK mortgage market size: Gross mortgage lending fell in 2023, down to an estimated £223.5bn.
- UK mortgage market share: Lloyds Banking Group continues to lead the way in the UK mortgage market, with an 18% market share.
UK Mortgage Market Outlook
Declining long-term affordability is a threat to the UK mortgage market. House prices rising above wage inflation for most the last two decades has produced a growing reliance on family help for deposits. With interest rates high and rising rents making it harder to save, there are calls for reform in the market. Beyond helping people save, lenders may look at term lengths and potentially very high LTV mortgages.
The need for support from lenders is clear, with mortgage holders concerned about rising costs but not wanting to make changes without advice. There are more options available due to the implementation of the Mortgage Charter and lenders must be proactive in communicating support. This will not only reduce potential arrears, but build customer loyalty.
Mintel’s UK Mortgage Market Research is Essential for Market Professionals Wanting to Understand:
- Mortgage market size and performance, including a five-year market forecast
- The impact of high interest rates on the UK mortgage market
- Market share of the leading mortgage lenders
- Recent mortgage activity and plans over the next two years
- Rising mortgage costs and consumers’ responses
- Homeowners’ and non-homeowners’ attitudes towards mortgages
- Analysis of the latest competitive strategies and launch activity
More About This Report
This report explores the UK market for residential mortgages. This includes lending secured against dwellings and can be split into the following categories:
House purchase: the loan is used to purchase a property.
Remortgage: the borrower redeems their mortgage with their current lender and takes out a new mortgage on the same property.
Further advance: a form of additional borrowing offered by lenders to their existing mortgage customers for other purposes than buying a home. This could include funding home improvements but can also be used for other reasons such as buying a car.
For information on commercial mortgages, please see Mintel’s UK Commercial Mortgages Market Report.
Meet The Expert
This report is written by Adrian Reynolds, principal analyst at Mintel. Adrian has over a decade of experience working in research and insights. He joined the technology and media team at Mintel in 2017, having previously worked as a TV analyst. Since January 2022, Adrian has focused on financial services and FinTech. He holds a BSc in Business Administration and a Master’s in International Business.
High rates hit lending in 2023 and another difficult year is expected. Lenders must raise awareness of remortgaging options to help people cope with rising costs.
Adrian Reynolds
Principal Analyst
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Table of Contents
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Executive Summary
- Opportunities for the mortgage market
- Develop more tailored mortgage products for the modern first-time buyer
- Boost brand loyalty and reduce arrears by proactively communicating the Mortgage Charter
- Utilise technology to modernise the market and support new buyers
- Market dynamics and outlook
- Market size & forecast
- Market predictions
- The high cost of borrowing caused a large decline in mortgage lending in 2023
- Graph 1: gross sterling secured lending to individuals, 2018-23
- House prices declined in late 2023, but the longer term trend has hit affordability
- Graph 2: average house price, 2005-2023
- The mortgage lending market is expected to remain subdued for several years
- What consumers want and why
- Mortgage ownership remains stable at roughly a quarter
- Graph 3: housing situation, by age, 2024
- Recent mortgage activity has been more focused on remortgaging than purchasing
- Graph 4: time of last mortgage arrangement, 2024
- Graph 5: reasons for last mortgage arrangement, 2024
- The consistency of fixed-rate deals helps customers plan their finances in a turbulent economic environment
- Graph 6: types of mortgage held, 2024
- Remortgaging activity continues as people look to limit rising costs
- Graph 7: change in mortgage costs over the last 12 months, 2024
- Mortgage holders want greater support from lenders to ensure they have the right deal
- Graph 8: attitudes towards mortgages, 2024
- The cost of borrowing is delaying house purchases for non-owners
- Graph 9: “I am currently saving for a deposit for a home”, 2024
- Graph 10: “Rising interest rates have stopped me from taking out a mortgage in the last 12 months”, 2024
- Innovation and marketing
- Lender innovation could focus on higher LTV while FinTechs are seeking to streamline the mortgage process
- Limited purchase activity has seen providers reduce mortgage advertising with greater emphasis on brand building
- Graph 11: total above-the-line, online display and direct mail advertising on mortgages, excluding equity release, 2019-23
- Brand research
- Trust and customer service have strengthened Nationwide’s brand perception
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Market Dynamics
- Market size
- High interest rates and a difficult economic environment caused a major drop in mortgage lending in 2023
- Graph 12: gross mortgage lending to individuals, 2018-23
- Declining affordability sees mortgage lending fall to lowest level since 2015
- Outstanding mortgage balances have grown rapidly over the last decade
- Graph 13: gross outstanding lending secured against residential properties, 2014-23
- Mortgage arrears increase sharply as costs rise
- Market forecast
- Reduced affordability for first-time buyers will continue to limit lending over the next five years
- Mintel’s central forecast expects modest but consistent growth following another fall in 2024
- Learnings from the last income squeeze
- Graph 14: gross sterling secured lending to individuals, 2005-14
- Market segmentation
- Remortgaging takes an increasing share of lending in 2023…
- Graph 15: segmentation of gross mortgage lending, 2017-23
- …despite being down significantly on 2022
- House purchase loans dropped nearly 31% in 2023
- Remortgaging declined following the surge in 2022
- Growth in high LTV mortgages may be necessary to boost further lending moving forwards
- Graph 16: LTV ratio for mortgage lending, 2019-23
- Mortgages at over 95% LTV may be needed to boost affordability for first-time buyers
- Market share
- Lloyds continues to lead the way despite a small decline in outstanding mortgage balances
- The leading six lenders account for 73% of outstanding mortgage balances
- Channels to market
- 78% of people arranging a mortgage in the last five years used advisory services
- Graph 17: mortgage advice, 2024
- The decline in gross lending will hit the advisory market
- The housing market
- The average UK house price has nearly doubled in the last 20 years
- Graph 18: average house price, 2005-2023
- High interest rates hit average house prices in 2023
- Rising prices of higher end homes reflect the market inequality
- Buyers paid eight times the median national income for property in 2023
- Graph 19: ratio of median house price to median gross annual earnings, England and Wales, 1997-2023
- Build Societies Association calls for government action to increase the number of first-time buyers
- The number of residential property transactions has fallen sharply
- Graph 20: residential property transactions over £40,000, 2016/17-23/24
- Mortgage rates remain high as expectations of base rate cuts fail to materialise
- Graph 21: interest rates for selected types of mortgage, 2017-24
- Building activity remains below government targets as new build prices rise
- Graph 22: number of permanent dwellings started and completed, 2000/01-2022/23
- Rising rents will reduce make saving for deposits more difficult
- Macro-economic factors
- The UK moves out of recession in the first quarter of 2024
- Graph 23: GDP, 2021-24
- High interest rates reduce adding strain on mortgage holders while reducing affordability for non-homeowners
- Graph 24: Bank of England base rate changes, 2018-24
- Falling inflation has reduced pressure on household finances
- Graph 25: CPI inflation rate, 2021-24
- Overall consumer sentiment has started to recover…
- Graph 26: financial wellbeing index, 2019-24
- …but confidence in financial prospects still varies widely by housing situation
- Graph 27: financial confidence index, 2019-24
- Regulatory and environmental factors
- FCA’s Consumer Duty will require a more customer-centric approach
- The Consumer Duty focuses on four key outcomes
- Buyers must weigh up lower stamp duty versus higher interest rates
- Mortgage Charter comes in to support borrowers concerned about higher rates
- Leasehold and Freehold Reform Bill amendments set to maintain ground rent cap
- Government scraps minimum EPC rating plans for rental properties
- Graph 28: energy efficiency rating bands for dwellings, 2012 and 2022
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What Consumers Want and Why
- Mortgage ownership
- Mortgage ownership is stable at around a quarter, but the under-35s are more likely to be in the rental market
- Ownership remains stable but first-time buyers will find it increasingly difficult to get a foot on the ladder
- Graph 29: housing situation, by age, 2024
- The proportion of mortgage holders struggling financially has risen in the last year
- Graph 30: financial situation by housing situation, 2024
- Mortgage activity
- Nearly half of mortgage activity has been for remortgaging
- Nearly a quarter arranged their last mortgage within the past year
- Graph 31: time of last mortgage arrangement, 2024
- Remortgaging dominates mortgage activity within the last year
- Offer proactive support and raise awareness of the options under the Mortgage Charter
- Type of mortgage held
- Most mortgage holders are opting for the security of fixed-rates
- Graph 32: types of mortgage held, 2024
- Tracker mortgages are proving too risky for most people with rates high
- Mortgage costs
- The high cost of borrowing will leave many looking to minimise cost increases as fixed-rate deals expire
- Rising costs have continued in the last year despite high levels of remortgaging
- Graph 33: change in mortgage costs over the last 12 months, 2024
- Leisure spending is being hit as mortgage holders look to cut costs
- Graph 34: steps taken to deal with higher mortgage costs in the last 12 months, 2024
- Mortgage plans for the next two years
- First-time buyers are still planning purchases and will need support on affordability
- Fixed-rate mortgages will continue to be popular with new buyers
- Graph 35: planned mortgage arrangements in the next two years, 2024
- Expand ISA incentives to help first-time buyers save deposits
- Graph 36: funding sources alongside mortgage for planned first home purchase, 2024
- The reliance on the “bank of mum and dad” is likely to grow
- Attitudes of mortgage holders
- There is strong demand from mortgage holders for greater support from lenders
- Lenders must do more to help customers find the most suitable mortgage
- Graph 37: attitudes towards mortgages, 2024
- Concerns over property price decline are unlikely to be realised
- Lenders must proactively support customers and boost awareness of the options under the Mortgage Charter
- Regulation and new technology can help meet the strong demand for greater support from lenders
- Mortgage advice will remain vital with many unsure over switching to save money
- Graph 38: “I find it hard to judge whether you could save money by switching mortgages”, 2024
- Graph 39: “I would seek professional advice before making changes to my mortgage”, 2024
- Younger mortgage holders will be seeking advice on extending term lengths
- Attitudes of non-homeowners
- There is widespread concern over the potential for future home ownership
- Graph 40: concerns over future home ownership, 2024
- High interest rates are delaying people buying their first home
- Graph 41: “I am currently saving for a deposit for a home”, 2024
- Graph 42: “Rising interest rates have stopped me from taking out a mortgage in the last 12 months”, 2024
- Lenders must react to reduced affordability for first-time buyers
- Reports of surging rents and service charges could stifle interest in shared ownership schemes
- Graph 43: interest in shared ownership schemes, 2024
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Innovation And Marketing Trends
- Competitive strategies
- The leading lenders have increased mortgage rates after a small decline at the start of the year
- The preference for established lenders could be tested as affordability declines
- Atom Bank raises £100 million investment to disrupt the mortgage market
- Lenders call for further reform of the market
- Rising weather-related insurance claims could limit lending on risky properties
- Launch activity and innovation
- Santander becomes the only top six lender to offer 95% LTV mortgages on all new build homes
- Growth in high LTV mortgage offerings could boost affordability for younger buyers and renters
- Skipton partners with creative agency to relaunch the brand
- Finova looks to streamline the mortgage switching process with new portal
- FinTech Coadjute receives £3 million investment from Lloyds Banking Group
- Innovations like NatWest’s Home Energy Hub highlight the need for sustainability measures that save money
- Advertising and marketing activity
- Advertising spend on mortgages has plummeted in recent years
- Graph 44: total above-the-line, online display and direct mail advertising on mortgages, excluding equity release, 2019-23
- Halifax was the only major bank to increase mortgage adspend in 2023…
- …and dominated advertising in the market
- UK Finance works with lenders to launch advertising campaign highlighting mortgage support
- UK Finance releases “Reach Out” TV advert to highlight lender support for struggling mortgage holders
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Brand research
- The major mortgage lenders benefit from reputation and longevity in the current accounts market
- Building society Nationwide instils trust while differentiating its brand
- Strong customer service cannot be underestimated in difficult economic times
- Relatively low commitment to brands could bring opportunity for newer lenders
- Graph 45: consumer commitment to selected brands, 2024
- Atom Bank can utilise a more progressive brand image but must gain further trust
- Atom Bank performs well for users but awareness remains low
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Appendix
- Report scope and definitions
- Market definition
- Abbreviations and terms
- Methodology
- Consumer research methodology
- Nielsen Ad Intel Coverage
- Market forecast data and methodology
- Forecast methodology
- Market forecast and prediction intervals (value)
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