EY: Mortgage lending forecast to rise 4.1% in 2020?>
Residential mortgage approvals rose in December 2019 to the highest level since 2017, overall mortgage lending growth is only set to rise 4.1% this year according to EY.
In its latest ‘EY ITEM Club Outlook for financial services’, EY predicts subdued growth despite the General Election result and clarity on the first stage of Brexit.
Omar Ali, UK financial services managing partner at EY, said: “2020 began with increased political certainty which is positive for consumer and business confidence, and the growth in lending at the back end of 2019 has given cause for cautious optimism.
Despite historically low-interest rates and accommodative loan-to-value ratios, affordability remains a key challenge for prospective homebuyers.
In Q3 2019, the average house price was equal to 4.7 times the average borrower’s income.
Dan Cooper, head of UK banking at EY, added: “Whilst there are early signs that consumer confidence might begin to pick-up following the General Election, lending growth is expected to remain pretty uninspiring over the next couple of years and the low-interest rates will continue to squeeze net interest margins.
The housing market has remained subdued however a pick-up in December following the election result has suggested that improved sentiment could give a boost to homebuying.
A good Brexit outcome will continue to lay positive foundations for future growth, but there are deeper, structural changes and important emerging trends in both consumer and business finance which the industry needs to tackle.