Housing and mortgage affordability in the UK deteriorated significantly in 2023, reaching its lowest levels since the global financial crisis, due to rising borrowing costs.
The credit rating agency Fitch said that the increase in household income and the decline in home prices failed to compensate for the sharp rise in interest costs, as the average cost of a five-year mortgage reached 4.8% in 2023 compared to 3.4% in 2022.
The buy-to-let sector was the most under pressure, due to the spread of interest-only lending – a mortgage in which interest payments are made during the first years of the loan – and average interest coverage ratios on new loans fell to 195% in 2023 from 300%. In 2022.
The agency explained in a report published Thursday on its official website that the potential scenario of high interest rates in the long term represents a great risk, because it means continuing pressures, with borrowers exiting fixed-interest products in the period from 2019-2021, which were at rates less than 2%.
Fitch expects housing and mortgage affordability in the UK to improve over the next three years, if interest rates decline.
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