Will the surge in activity continue this year?
The UK mortgage market saw significant growth in the fourth quarter of 2024, with both first-time buyers and home movers increasing by nearly a third compared to the same period in 2023, according to UK Finance’s latest Household Finance Review.
The trend is expected to continue into early 2025, driven by favourable borrowing conditions and upcoming changes to Stamp Duty thresholds.
Despite concerns about economic uncertainty, UK Finance said 2024 outperformed expectations for mortgage activity. Falling interest rates throughout most of the year contributed to a 16.4% rise in first-time buyers and a 14.7% increase in home movers.
The sharp rise in activity during the final quarter may have been influenced by buyers seeking to finalise purchases before Stamp Duty changes take effect in April.
Meanwhile, refinancing slowed compared to the previous year, though a stronger remortgage market is expected in 2025. An estimated 1.8 million fixed-rate mortgages will reach maturity in 2025, up from 1.4 million in 2024, which is expected to drive increased refinancing demand.
Currently, internal product transfers remain the most common option for borrowers looking to refinance, though external remortgaging is anticipated to rise in the coming months.
UK Finance predicts gross mortgage lending will reach £260 billion this year, an 11% increase from 2024. Lending for house purchases is expected to increase by 10% to £148 billion, while external remortgaging is projected to grow by 30% to £76 billion. In contrast, lending for new buy-to-let properties is forecast to decline by 7% to £9 billion. Mortgage arrears are anticipated to decrease by 5%, with an estimated 99,000 borrowers falling behind on payments, down from 104,200 in 2024.
“The final quarter of 2024 showed the resilience of UK households amid changing economic conditions, with mortgage lending showing strong growth and arrears continuing their downward trend,” said Eric Leenders (pictured), managing director of personal finance at UK Finance.
“The regulatory review of mortgage lending rules, which are arguably restricting the number of people who can access mortgage lending, will be welcome news for aspiring homeowners. Reviewing these rules would help with affordability issues, not just for first-time buyers but also those looking to move further up the housing ladder.”
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