The Intermediate Mortgage and Mortgage Association (IMLA) has released its annual ‘New Normal’ report, predicting the mortgage and housing market over the next two years.
The report predicts that total lending will shrink to £205bn in 2024, before recovering to £210bn in 2025. This will be followed by a 28% year-on-year decline to £225.5bn in 2023, mainly due to rising mortgage rates. .
The economic downturn in 2023 includes a 30% drop in home purchase loans to £135bn and a 24% drop in refinance loans to £82bn. The report suggests that the main factor behind the current economic downturn is rising mortgage rates.
Regarding mortgage affordability, the report reviews the impact of the transition from lower to higher mortgage rates in 2022.
Mortgage interest payments consumed 12.7% of gross income on average in the year to September 2023, still below the long-term average of 13.8%.
However, for first-time buyers, this number is 16.0%, higher than the long-term average of 14.8% and reflects the challenges first-time buyers face as home price inflation outpaces income growth. ing.
The report also predicts that intermediaries’ market share will continue to increase from 84% last year to 89% in 2024 and over 90% in 2025. However, the increase in market share is not expected to prevent intermediaries from falling in value by 6%. In 2024, lending by intermediaries will increase, and in 2025, intermediary transaction volumes are expected to increase by 4%.
IMLA Executive Director Kate Davies said: “After the shocks that have hit the global economy in recent years, the lockdowns of 2020 and 2021, and the Russian invasion of Ukraine in 2022, 2023 offers a welcome respite. “It has returned to a partially normal state.” Supply chain disruptions and war-related disruptions have been significantly reduced.
“But our ‘new normal’ means a higher interest rate environment than perhaps the one we were all too accustomed to after the financial crisis.
“With the benchmark interest rate rising from 0.1% to 5.25% in just over two years, the mortgage sector has inevitably been subdued to some extent.
“However, while the housing market has been surprisingly resilient and mortgage payments have proven comfortable for the typical borrower, longer mortgage terms are a factor. There is no mistake.
“In these more challenging times, intermediaries play a critical role in guiding borrowers to the best financial solutions for their needs, and their advice will remain essential to the borrowing community in 2024 and beyond. I guess.”