IMLA has published its annual report on prospects for the mortgage and housing markets over the next two years. The ‘New Normal’ report estimates that gross lending fell to £225.5 billion in 2023, down 28% on the previous year. Within the total, lending for house purchase fell 30% to £135 billion and remortgaging by 24% to £82 billion. Higher mortgage rates were the main factor driving the downturn.
The report predicts that gross mortgage lending will fall further to £205 billion in 2024 before recovering slightly to £210 billion in 2025, with house purchase lending of £120 billion and £122 billion respectively and remortgaging of £78 billion and £80 billion.
Mortgage affordability
In last year’s New Normal report we examined the impact on affordability of the rapid shift from low to higher mortgage rates in 2022. Unsurprising, affordability remained a key issue in 2023, so we revisited the topic in this year’s report to see how the market has responded. As we did not have full-year data for 2023, we examined the average for the first nine months of 2023.
The data shows that, while home-mover mortgage interest payments consumed 12.7% of gross income on average in the year to September 2023, this figure was still below its long-run average of 13.8%. In contrast, for first-time buyers the 2023 figure of 16.0% was above the long run average of 14.8%. This difference reflects the increased difficulties first-time buyers have faced as house price inflation has outstripped income growth.
From a historic perspective, the overall mortgage payment burden is roughly back to where it was before the financial crisis of 2008, suggesting again that it is manageable for the average borrower.
Intermediary market share to increase further
We expect mortgage intermediaries’ share of lending to keep rising, from 84% last year to 89% in 2024 and over 90% in 2025. However, the rise in share of business is not enough to prevent the value of lending arranged by intermediaries falling 6% in 2024. 2025 should be a better year and we predict a 4% rise in broker business volumes.
Kate Davies, executive director of IMLA, comments:
“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.
“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.”
For further information please contact:
Rob Thomas, Principal Researcher, on +44 (0) 1825 733622
Paula John, Paula John Communications
Tel: +44 (0)7973 435 299
Email: paula.john@imla.org.uk
Notes to Editors
The Intermediary Mortgage Lenders Association (IMLA) is the trade association that represents mortgage lenders who lend to UK consumers and businesses via the broker channel. Its membership of 53 banks, building societies and specialist lenders include 18 of the 20 largest UK mortgage lenders (measured by gross lending) and accounts for about 90% of mortgage lending.