Mortgage lending growth forecast to continue despite Brexit uncertainties

Written by Oliver Wade
29/03/2018

Gross mortgage lending is forecast to continue growing in 2018, the eighth consecutive year in a row, to reach its highest level since 2007, with falling inflation to support the growth despite the uncertainty surrounding Brexit, according to the Intermediary Mortgage Lenders Association’s (IMLA) forecast, The New Normal: Prospects For 2018.

The forecast further suggests that gross mortgage lending will reach £265bn with net mortgage lending of £47bn, while remortgage activity will continue to be more “buoyant” than lending for property purchase, with the total remortgaging value reaching £94bn, increasing by 4.4% and accounting for 35.5% of total lending. The report further stated that B2L lending will recover in 2018 and 2019 despite the adverse tax changes, which in turn “reflects” strong remortgage activity and an improvement in property purchase lending, a consequence of higher levels of “churn” in the market.

IMLA’s analysis also illustrated a large deviation in the volumes of funding for property purchase via mortgages between 2006 and 2016. In 2006 52% of property purchases came through mortgages, whereas that figures plummeted to 41% in 2016, with a “slight” increase to 41.5% in 2017. The aggregate LTV ratio of the housing market has also fallen to below pre-crash levels at 26%, as an increase in homeowners’ equity reduces the role of mortgage debt

IMLA stated that these trends have been influenced by the UK’s ageing population, as UK homeowners’ had an average age of 57 in 2016, compared to 52% in 1996. However, the report also said that this increase is far more “rapid” than the rate of ageing across the UK population as, in 2016, 76% of all owner-occupiers were aged 45 or above, compared to 62% in 1996.

Furthermore, the level of housing turnover in the UK has declined dramatically, with the average homeowner residing in their house for an average of 19.2 years, compared to 7.4 years when housing transactions peaked in 1988.

IMLA executive Kate Davies commented: “We are witnessing a step-change in the market, as the shifting demographics of homeownership and the housing supply shortage create a structural break with what has been the norm. Despite the recovery of the housing market and the availability of mortgage finance since the last recession, stricter affordability rules are limiting activity by those who would otherwise be highly leveraged. Transactions levels have fallen and there is evidence of more cash being injected into home purchase. People are moving less often – whether by choice or constraint.”

Vida Homeloans also commented on the report, its director of sales Louisa Sedgwick said: “These gross mortgage lending figures from IMLA are promising, however the challenges the market faces – especially first-time buyers - are still considerable.

“The change in socio-economic influences, in particular the growth of specialist first time buyers who need help from the Bank of Mum Dad - and who may have slightly impaired credit - have created new market segments that are currently underserved by high street lenders.”

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Adam Cadle talks to Vida Homeloans director of sales - mortgages Louisa Sedgwick about the specialist first time buyer and buy to let markets

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