Reduced political uncertainty to support UK mortgage market growth

The reduced political uncertainty will support the growth of the UK mortgage market, with gross mortgage lending forecast to reach £268bn in 2020, and £275bn in 2021, according to a new report from the Intermediary Mortgage Lenders Association (IMLA).

The latest report, which has made a series of predictions about the mortgage market over the next two years, revealed that while remaining resilient in the face of wider uncertainty, gross mortgage lending fell by almost 2% last year.

IMLA has predicted gross mortgage lending will grow by 1.4% this year to £268bn, rising to £275bn in 2021 – with the increase largely driven by lending for house purchases.

IMLA executive director, Kate Davies, commented: “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.”

As well as the reduced political uncertainty, the report suggested market growth will be further supported by a growth to earnings and the low rate environment – which has already provided mortgage holders with a £32bn windfall in reduced interest payments compared to a decade ago.

IMLA is also expecting intermediaries to grow their market share to 77% of all mortgage transactions this year, a slight increase from 2019.

However, the report also stated there are several key challenges facing the mortgage market over the coming years. The growth predicted will also partly rely on the UK's ability to negotiate a trade deal with the EU.

IMLA’s report predicted the buy-to-let market will continue to fall – to £40bn in 2020 and £39bn in 2021 – with tax relief for landlords being fully removed in April this year.

“Although we expect modest growth for the mortgage market over the next two years, the UK’s housing market is still far from perfect,” Davies added.

“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.”

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