IMLA Market Review Forecast Predicts Rise in Gross Mortgage Lending of 2018

The Intermediary Mortgage Lenders Association’s (IMLA) fifth annual market review forecast has been released, and a rise in the gross mortgage lending of 2018 has been foreseen. This will be the case for the eighth year in a row, reaching the highest figures since 2007.

However, challenges still exist in relation to the current housing crisis that the UK is currently experiencing. A shortage of properties combined with a very low turnover, along with the various other obstacles in the way of first-time buyers and “second-steppers”, have created a rough road to becoming a homeowner.

This report focuses on the ageing demographics, those that may result in profound consequences for the mortgage market. Amongst older homeowners there is a growing amount of those with housing who have less, or even no reliance on mortgage finance, but are determined to keep their properties for as long as possible. This kink in the line of property turnaround is not helping the situation, and is causing a knock-on effect for the second-steppers looking to climb the property ladder.

Kate Davies, Executive Director of IMLA, has commented: “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.”

Looking at this forecast, we can expect to see gross mortgage lending reaching £265 billion, with a net mortgage lending of £47 billion. Applications for remortgages appear to be in a higher demand than lending for house purchase, seeing a total of £94 billion going towards remortgaging.

IMLA Market Review Forecast Predicts Rise in Gross Mortgage Lending of 2018

A large portion of this lending is in fact coming from intermediaries on behalf of buy-to-let clients, with an expected £158 billion coming in this year, and £164 billion in 2019. If this forecast carries through, we will be seeing a higher share of lending coming from this source than there was last year, seeing a percentage of 72.2, compared to the 71.3% result of 2017.

However, in 2018 and 2019 we should apparently expect to see a recovery for gross buy-to-let lending, despite the changes in tax for landlords, such as the Stamp Duty increase.

In IMLA’s analysis we can see that less new house purchases have been funded by mortgages. The proportion of such has fallen from 52% in 2006 to 41% in 2016. 2017 shows a slight increase, but only just at 41.5%.

With the average age of a homeowner rising from 52 in 1996 to 57 in 2016, we are beginning to see a changing face of our UK homeowners. With this increase of homeownership amongst older people (bearing in mind that many of these will have paid of their mortgage), there is a historic low of housing turnover. Overall, this has resulted in a reduced dependence on borrowing. Only 10.6% of the total mortgages in 2017 were new applications, which is less than half of 2003’s peak of 24.2%.

Between 2008 and 2017, £261 billion has been funded into the property market, due to a combination of regular and lump sum mortgage repayments and cash deposits. The number of first-time buyers increased to 366,000 in 2017, which is thought to have been assisted by extra factors such as cash inheritances, and the ‘Bank of Mum and Dad’. This help towards the saving of a deposit, alongside government schemes such as Help to Buy and the removal of Stamp Duty for first-time buyers, has been a huge help for those looking to make their first step on the property ladder.

However, despite the promising amount of progress, the amount of people progressing on the ladder and upsizing their property have reduced 47% since 2007, due to stricter mortgage affordability criteria on larger homes.

Davies has also commented: “It’s important that government now recognises the demographic and socio-economic changes that have influenced the direction and makeup of the housing market.

“Whilst home ownership remains the ultimate goal for many, there will be significant numbers of people who will choose or need to rent at some point in their lives. The market needs to work for everyone and we all – government, lenders and housing industry – should work together to adopt new approaches that can increase the supply of homes suitable for all ages and tenures.”