The value of new UK buy-to-let lending is set to fall by -53% in 2023 according to trade body UK Finance, underlying how investors are being increasingly staying away from the housing market.

The value of new buy-to-let purchase lending looks set to fall to just £8billion in 2023, likely due to higher mortgage costs.

The government’s policy to cut mortgage income tax relief and replace it with a 20% tax credit is often blamed on landlords staying away, as it has caused them to be taxed on their income rather than their profits – something that’s far more damaging now mortgage costs are so high.

If this wasn’t bad enough things set to get worse, as UK Finance predicted new buy-to-let purchase lending to fall again by -13% in 2024, to bring the total down to £7billion.

James Tatch, head of analytics at UK Finance, said: “2023 was a challenging year for both prospective and existing mortgage borrowers, facing affordability pressures from higher interest rates and the increased cost-of-living, as well as house prices still at elevated levels relative to income.

“With these pressures unlikely to ease significantly in the short term, we expect lending to remain weak in 2024, with a gradual improvement in affordability reflected in a modest increase in activity levels in 2025.”

Across the mortgage lending market as a whole, cases of arrears are set to worsen this year, rising by 30% to 105,600. Meanwhile possession cases are set to rise by 13%, to 4,400.

By 2024 arrears cases should worsen again to 128,800 cases, while possessions will increase by 16% to 5,100.

Tatch added: “The challenging environment has also pushed more households into mortgage arrears.

“However, the rigorous affordability tests in place since 2014 are now working to ensure that the vast majority of customers can still afford their mortgage payments even with the increased pressure on their finances.

“Although we forecast more customers will encounter arrears next year, we expect numbers to peak well below levels seen previously.”