"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. "
It predicts that gross mortgage lending will reach £265 billion with net mortgage lending of £47 billion, and that remortgage activity will continue to be more buoyant than house purchase lending, rising by 4.4% to reach 35.5% of total lending.
It also expects buy-to-let lending to recover in 2018 and 2019 despite the adverse tax changes for landlords.
Additionally, IMLA forecasts lending via intermediaries to increase its market share further - rising to £158 billion this year and £164 billion in 2019, a share of 72.2% compared to 71.3% in 2017.
However although growth in mortgage lending is expected to continue, IMLA says the market "continues to be challenged by a combination of a shortage of properties, very low levels of turnover and obstacles to both first-time buyers and second-steppers”.
The report also focuses on ageing demographics, which it says "will have profound ramifications for the mortgage market". This includes a growing concentration of housing wealth among older home-owners with less or no reliance on mortgage finance but a desire to remain in their properties which will lead to fewer transactions and "consequential knock-on effects for second steppers".
IMLA says second steppers are feeling the "effects of an illiquid market". Despite 377,200 steppers in 2017, this overall number is down 42% since 2007, as many struggle to meet stricter mortgage affordability criteria on larger homes, despite any price appreciation on their first home and equity gains as a result.
Kate Davies, Executive Director of IMLA, commented: “While the mortgage market currently appears resilient, it is clear that a number of structural factors have been changing our perceptions of what “normal” looks like.
"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.
“Increased housing wealth can benefit older homeowners relying on a buoyant property market to help fund their retirements, along with first-time buyers who can access the Bank of Mum and Dad for help towards a deposit. But a chronic housing supply shortage is contributing to an increasingly illiquid market. Home movers, or ‘steppers’, in particular face a number of hurdles including high house prices relative to earnings, stricter mortgage affordability criteria and a lack of suitable homes – holding back housing turnover and transaction volumes.
“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.”
