"I think people are feeling much more bullish," says IMLA executive director
When it comes to the UK housing market, uncertainty is a recurring theme. Upcoming changes to stamp duty in April 2025, a decline in mortgage approvals from 68,000 to just 60,000 in April of this year, and a predicted rise of 4% in asking prices mean that, for brokers and their customers, it’s anything but plain sailing.
Yet, as Kate Davies (pictured), executive director of the Intermediary Mortgage Lenders Association (IMLA), told Mortgage Introducer, there’s an unexpected air of resilience heading into 2025.
“I think the mood music on the street is more positive,” she said. Drawing on her experiences at recent events, Davies described an industry weathering the storms of political shifts and fiscal demands with a determined optimism. The data Davies references - results from a Q3 tracker survey published in September - reveal the measured pulse of a market navigating post-election adjustments. While acknowledging the initial uncertainties tied to a new government and chancellor, she highlighted a gradual settling.
“I think now people are feeling much more bullish,” she noted. “I went to a number of events throughout November, some specifically for intermediaries, and the feeling was much more upbeat. I wouldn't say it's gung ho, but it's certainly not gloomy. I didn't get the impression that people were feeling they'd lost confidence. I think the first Budget settled a lot of nerves. Obviously, employers are going to have to pay a lot of national insurance, but there's a feeling of, it wasn’t well trailed.”
And the mortgage market, Davies believes, is gearing up for a monumental year. With inflation expected to come down at some point in 2025, first time buyers are assessing their options carefully – and it doesn’t seem so bleak as it once did.
“A huge number of people are going to have to refinance next year as their fixed-term products come to the end of term - meaning intermediaries and lenders are going to be busy,” she told Mortgage Introducer. With estate agents reporting increased listings, the housing market's resilience is almost counterintuitive amid broader economic pressures.
“There's a lot of property coming on to the market, with estate agents saying they've got more on their books. It's almost counterintuitive that the market seems to be so resilient and still very strong. People still want to buy – and many of them will need mortgages in order to do so,” she told Mortgage Introducer.
A war on landlords?
The buy-to-let segment, however, paints a more nuanced picture. With a 2% downturn in Q3, Davies acknowledges a modest dip rather than a market collapse. Yet the broader narrative around landlords has her concerned.
“Don’t bash landlords,” she insisted. IMLA’s reports consistently highlight the vital role of private landlords in housing provision. “There's been such a shift over 30 years of government funding in the public rented sector - pointing out that the private rented sector is actually pretty important. And that report specifically called out some of the provisions of the Renters Rights Bill, which is currently going through [parliament].”
And while the bill is only on its second reading, there’s still a lot of discussions that need to be had.
“There are some specific things that we think they need to clarify and be aware of,” Davies explained. The private rented sector's complexity is clear. With 80% of landlords owning just one or two properties, motivations range from inherited homes to strategic long-term investments. Davies doesn’t shy away from discussing the challenges facing small landlords, from tax policies to tenant issues.
“Some might just be fed up and can’t be bothered anymore,” she told Mortgage Introducer. “They've had bad tenants or bad experiences and they will sell. In lots of cases they will sell to another landlord, so the property won't actually get lost from the private rented sector. There's also a certain amount of activity going on with more people wanting to increase a portfolio and incorporate - they're making better use of the tax breaks for landlords who are running their portfolios through a business. It's such a curious picture that we have such a very disparate jigsaw pattern, a patchwork quilt of landlords of different shapes and sizes with different motivations and different business models”
This multifaceted sector is about as far from monolithic as the market has seen. The rise of incorporation, as landlords seek tax advantages, adds another layer of complexity, with Davies adding that, despite frustrations, many landlords are persevering.
“We don’t see a big exodus,” she reiterated. While some properties may shift hands, much remains within the private rental ecosystem.
Legislation’s double-edged sword
Regulatory changes, particularly around tenants’ rights, are another pivotal issue. The potential abolition of no-fault evictions, a hot-button topic, exemplifies the ongoing tension between tenant protections and landlord rights.
“It’s very hard to predict what the degree of abuse of the system might be, or how slow and painful it might be,” Davies cautioned. “We know that the courts are pretty clogged up at the moment, and that's something which the Ministry of Housing, Communities and Local Government [is dealing with]. There could be lots of delays if there are lots of challenges to what landlords say they want to do too.”
This complex interplay between clogged court systems and stricter requirements for landlords raises practical concerns about implementation. A striking example lies in rolling tenancies - a shift that could disrupt traditional rental agreements. Davies raises the scenario of tenants seeking fixed-term arrangements, a preference potentially at odds with the proposed new law.
“I do wonder how useful it's going to be for a lot of tenants going forward that you can't upfront agree on a fixed term for a lease,” she told Mortgage Introducer. “However, for a tenancy, because they're going to be rolling tenancies going forward, I would have thought there'd be plenty people who are moving to a new area for a while - perhaps who know they're going to be working in a certain area and have a two year contract to work there. [Understandably] they want to rent somewhere for two years, so they'll take out their tenancy agreement with the landlord, and a landlord might be very happy to tie them in for two years and not fix it. However, as I understand it, the law won't recognise that anymore. They'll all be rolling tenancies – so that's a slight oddity.”
The road ahead
Despite the challenges, Davies’ outlook remains cautiously optimistic. For her, the enduring demand for housing and the mortgage market’s adaptability signal strength amid uncertainty. However, the evolving policy landscape and economic pressures underscore the importance of measured responses from stakeholders across the spectrum.
Davies’ insights illuminate a market that, while tested, continues to exhibit surprising tenacity. Whether navigating the nuanced dynamics of landlord-tenant relationships, or preparing for a surge in refinancing activity, the industry’s resilience is clear.
As she aptly puts it, “People still want to buy. Others still want to have mortgages.” For now, at least, the mood music on the street is more positive.
