What is the market outlook for the next two years?
Gross mortgage lending fell to £225.5 billion in 2023, down 28% on the previous year, the Intermediary Mortgage Lenders Association (IMLA) has reported.
House purchase lending and remortgaging experienced respective drops of 30% to £135 billion and 24% to £82 billion, with the primary catalyst for the downturn being attributed to higher mortgage rates.
The buy-to-let market saw a more pronounced decline, as gross lending was estimated to have plummeted by 48% to £30 billion in 2023. House purchase lending within the buy-to-let category fell by 51% to £8.5 billion, while remortgaging declined by 46% to £20.5 billion with the buy-to-let market feeling the impact of deteriorating affordability much harder compared to the owner-occupied market.
IMLA, in its recently published ‘New Normal’ report, also detailed the market outlook for 2024 and 2025.
The report forecasts that gross mortgage lending will fall further to £205 billion in 2024 before recovering slightly to £210 billion in 2025. House purchase lending is expected to drop to £120 billion next year and rise to £122 billion after a year, while remortgaging is predicted to fall to £78 billion and then increase to £80 billion in the next two years.
Data cited in the report also indicates that, on average, home mover mortgage interest payments accounted for 12.7% of gross income in the first nine months of 2023, slightly below the long-run average of 13.8%.
First-time buyers faced a higher burden, with the 2023 figure of 16% exceeding the long-run average of 14.8%, underscoring the challenges faced by first-time buyers as house price inflation outpaces income growth.
Meanwhile, the report anticipates a continued rise in the market share of mortgage intermediaries, increasing from 84% in the previous year to 89% in 2024, with expectations of surpassing 90% in 2025.
However, despite the upward trajectory in market share, the value of lending arranged by intermediaries is projected to decrease by 6% in 2024. A more optimistic outlook is predicted for 2025, with a projected 4% rise in broker business volumes.
“After the shocks that have buffeted the global economy in recent years – lockdowns in 2020 and 2021 and the Russian invasion of Ukraine in 2022 – 2023 saw a welcome respite and a partial return to normality as the disruption from supply chain and war-related dislocation eased considerably,” Kate Davies (pictured), executive director at the Intermediary Mortgage Lenders Association, commented.
“However, our ‘new normal’ is a higher interest rate environment than the one to which we became perhaps too accustomed post-financial crisis. The increase in base rate from 0.1% to 5.25% in just over two years has inevitably subdued the mortgage sector to a degree. Yet the housing market has proved remarkably resilient and mortgage affordability is comfortable for the typical borrower – although longer mortgage terms are no doubt a factor.
“In these more challenging times, intermediaries have played a key role in directing borrowers to the most appropriate financial solutions for their needs, and their advice will continue to be vital for the borrowing community in 2024 and beyond.”
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