The Trump Legacy: The most significant president

This article looks at the current state of both the secured loan and unsecured loan industry in the UK. It also explores the key statistics and trends that are shaping the current borrowing markets. This includes mortgage debt to business loans, and how interest rates and regional differences are impacting consumers and businesses.

During 2024, UK households suffered increased homeownership costs, with the average monthly mortgage payment reaching £1,473. Other household bills reached an average of £728 per month, all increasing the strain on homeowners as they deal with inflationary pressures plus interest rate hikes.

• Average mortgage size: £185,565 in Q2 2024, up 2% from the previous quarter, yet 9% lower than the record high of £203,389 in Q3 2022.
  
  
• Outstanding mortgage debt: Current total UK mortgage debt stands at £1.66 trillion. Each household today has an average of £132,378 in outstanding mortgages.

Interest rates:

• 2-year fixed-rate mortgage (25% deposit): 4.8%
• 2-year fixed-rate mortgage (15% deposit): 5.08%
• 2-year fixed-rate mortgage (10% deposit): 5.55%
  

The average UK house price in July 2024 reached £289,723, with notable regional variations:

• England: £305,879
• Wales: £218,184
• Scotland: £199,398
• Northern Ireland: £185,025
  

• 96,070 homeowners fell into mortgage arrears of more than 3 months in Q2 2024, showing a slight quarterly decline.
  
  
• 980 properties faced repossession between April and June 2024, a 13% increase from Q1 2024.
  

The house prices-to-earnings ratio does reveal affordability struggles.

In 2024, house prices across England and Wales average 8.1 times the average salary. Regional disparities again emerge sharply:

• London: House prices soar to 12.7 times the average salary.
  
  
• North East of England: This is more accessible, with house prices at 4.9 times the average salary.

These numbers demonstrate the growing gap between income and real estate costs, particularly in areas with high demand like London.

The consumer lending landscape continues to change, with March 2024 data showing increased consumer lending. This increase signals growing consumer confidence amid a complex economic terrain.

• 57 million credit cards circulating in the UK as of 2022, nearly matching the population.
  
  
• July 2023 saw an average credit card purchase of £59.
  
  
• Outstanding consumer credit lending reached £231.4 billion, with £71.5 billion in credit card debt (a 6.38% year-on-year increase).
  
  
• Average credit card debt per household: £2,518
  
  
• Average credit card debt per adult: £1,324

August 2024 witnessed a £305 million rise in net consumer credit lending, indicating borrowing remains a standard financial tool.

Total UK debt climbed to £1.86 trillion in August 2024, which is a £27.39 billion increase from the previous year. This translates to a £507.32 rise in debt per adult.

Households are feeling the squeeze, with average total debt (including mortgages) at £65,665 per household and £34,536 per adult. This is roughly 95.6% of the average UK salary.

Debt interest payments tell a stark story:

• £80.4 billion in interest over 12 months, equating to £220 million daily.
• Average household annual interest payment: £2,831.

Lenders wrote off a huge £608 million in Q2 2024, with £288 million from credit card debt, which highlights the current repayment challenges facing UK consumers.

The bridging loan market recorded £201.8 million in Q2 2024, a 2.9% quarterly increase and the highest Q2 figure since tracking began in 2015. Homeowners and investors seek short-term financial solutions in a volatile market.

• 23% of bridging loans prevented chain breaks, up from 19% in Q1.
  
  
• Auction finance accounted for 14% of loans, jumping from 9% in the previous quarter.
  
  
• Unregulated bridging loans increased from 49% in the previous quarter to 54.2% in the second quarter, indicating that investors and landlords are adjusting to the new financial environment and making use of cheaper bridging loans.
  

In November 2024, the Bank of England lowered interest rates for the second time this year, from 5% to 4.75%. Inflation hovers slightly above the target at 2.3%. Mortgage rates reflect this trend:

2-year fixed-rate mortgage: 5.39%

5-year fixed-rate mortgage: 5.09%

These shifts will gradually influence borrowing patterns and credit costs.

Forecasts are predicting that UK household debt will reach £2,429 billion during 2025, with average household debt projected at £85,274. This rise is a reflection of the continued financial difficulties that UK consumers face, as they still depend on credit to cover their daily expenses.

• Net mortgage lending increased £3.056 billion in August 2024.
  
  
• Remortgaging activity expected to grow during 2025.
  
  
• Corporate lending remains stable, with slight improvements in credit availability for larger enterprises.
  
  

The business lending landscape has shown both resilience and strain in recent years.

The total value of new UK business lending is projected to reach £488 billion in 2024, marking a 2% decrease from 2023, yet still signaling a strong market despite the challenges posed by the economic environment.

• SME bank loans: In 2023, the total value of new SME loans in the UK was £59.2 billion, which was the third-highest year on record despite a 9% decrease from the year before.
  
  
• Regional trends in SME borrowing: London led other arears with £21.45 billion in new loans and overdrafts in the first half of 2023, while the South East and South West also recorded substantial figures, suggesting the continued dominance of southern regions in SME lending.

More than two in five (39%) SMEs sought external finance in recent years, often for cash flow management (69%) and working capital (49%). Despite recent declines in demand, the use of loans for business development has remained strong, particularly among larger firms.

The landscape of consumer lending and mortgages is constantly changing. Higher interest rates, escalating debt, and other increased borrowing costs, create a complex financial environment.

Yet, the market demonstrates resilience, with lending changes and consumer behavior adjustments. Understanding these changes is important for anyone managing personal finances, securing loans, or exploring property investments.

The business lending market continues to borrow from both large corporations and SMEs, demonstrating a degree of adaptability. External financing is still an essential tool for UK businesses navigating an increasingly difficult economic climate.