Mortgage lending to rebound in 2020 and 2021

The mortgage market is set to return to growth over the next two years owing to lower levels of political uncertianty, the ‘New Normal’ report from the Intermediary Mortgage Lenders Association has predicted.

The trade association forecasted that gross mortgage lending will grow by 1.4% to £268bn in 2020, rising to £275bn in 2021, with the rise largely being driven by lending for house purchases.

However, the report stated that the modest growth predicted will also partly rely on Britain’s ability to negotiate a trade deal with the EU.

Mortgage lending fell by between 1-2% in 2019, reaching an estimated £264bn.

Kate Davies, executive director of the Intermediary Mortgage Lenders Association, said: “The next two years certainly look positive for the mortgage market.

“In 2019 the sector remained resilient in the face of ongoing political uncertainty, but our report shows that a boost in consumer confidence is likely to support modest growth over the next two years.

“Intermediaries are driving a large part of that growth as borrowers continue to seek out the expertise of advisers to help them find a mortgage.”

IMLA expects intermediaries to grow their market share to 77% of all mortgage transactions this year, up slightly from 2019.

Remortgaging is expected to remain flat over the next two years at £100bn as more borrowers turn to product transfers and higher volumes of 5-year fixed rate mortgages.

Product transfer volumes grew by 13.3% between Q1 2018 and Q3 2019 and the report forecasts that this area of the market will grow again by 4% in 2020 to £172bn and a further 2% in 2021 to £176bn.

IMLA’s report also predicts that the buy-to-let market will continue to fall to £40bn in 2020 and £39bn in 2021 as tax relief for landlords is fully removed in April this year.

Davies added: “Although we expect modest growth for the mortgage market over the next two years, Britain’s housing market is still far from perfect. The Buy-to-Let sector continues to be under pressure from a spate of tax and regulatory measures enacted over the last five years and IMLA continues to call for a moratorium on any further changes to the Private Rented Sector.

“The planned restriction and eventual closure of Help to Buy also requires the industry to consider new ideas. More than 200,000 housing transactions have been supported by Help to Buy equity loans since their launch and without suitable alternatives first-time buyers will have fewer alternatives.

“IMLA believes that the new government should encourage the industry to embrace innovative solutions that could replace Help to Buy, bringing together lenders, housebuilders and the regulator to identify what could take the place of the scheme.”