Mortgage borrowing has fallen in Q1 year-on-year, despite growth in the number of mortgage applications at the end of 2023, UK Finance has found.

In its latest household finance review for the first quarter of the year, the banking trade body stated that there was a "noticeable uptick" in the number of mortgage applications, meaning the market may see a recovery in the first half of 2024 as applications follow through to completions.

For those who did secure a mortgage, the trend of borrowing at longer terms to reduce monthly repayments and help with affordability dipped slightly in Q1 but remained high, with 21% of new first-time buyers extending terms over 35 years.

The number of mortgage customers in arrears grew to 100,150 in Q1 2024, but UK Finance has found that the rate of growth was "modest", having increased from 107,250 cases in Q4 2023.

Early arrears cases fell slightly in Q1 2024, indicating that any increase in arrears in the next quarter will again be limited.

Furthermore, the data released by UK Finance showed weak spending activity in the first quarter, particularly for household goods.

However, credit card debt increased by 10% year-on-year in the same period, while half (50%) of credit card debt was interest-bearing, which is a record low proportion since 1995, as consumers paid down their balances and manage their interest through balance transfers.

Managing director of personal finance at UK Finance, Eric Leenders, said: "Some households were in a better place financially in Q1 this year, but we are not out of the woods yet. Among the more positive signs, we can see that overdraft and interest-bearing credit card debt are at record lows, and many households have stopped using their savings to help with the rising cost of living.

"However, we know that this will not be the case across all households, and lenders want to support anyone who might be struggling. Cost of living pressures remain, and with 1.6 million mortgages due to come off fixed rates this year, there may be challenges ahead for some."

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