"As rates decline, affordability is set to improve, unlocking more remortgage opportunities, particularly for the estimated 1.8 million borrowers reaching the end of fixed rate deals in 2025."
Q4 is always a time for reflection and forward planning. It’s a period when markets are dissected, and forecasts take shape for the upcoming year. The remortgage market has faced its share of challenges throughout 2024, yet there are positive indications that 2025 will see a resurgence in both the residential and buy-to-let sectors. The Intermediary Mortgage Lenders Association (IMLA) has predicted that remortgaging will gain momentum in the coming year, providing renewed opportunities for mortgage intermediaries.
To assess the outlook for 2025, it’s crucial to first examine the activity levels in the final quarter of 2024.
October trends
Leading into Q4, the Bank of England’s Mortgage Lenders and Administrators Statistics for Q3 showed that the share of gross advances for remortgages for owner-occupation dropped by 5.8 percentage points (pp) from the previous quarter to 22.8%, down 7.0pp from a year earlier.
Further Bank of England data in its October Money and Credit report revealed that net mortgage approvals for house purchases, a key indicator of future borrowing, increased by 2,200 to 68,300, marking the highest level since August 2022. Approvals for remortgaging with a different lender also rose for the third consecutive month, reaching 31,400, a month-on-month increase of 500.
November insights
November saw a 13% rise in remortgage completions, alongside a 2% monthly increase in pipeline cases. However, there was a 16% drop in new remortgage instructions, despite the overall cancellation rate decreasing by 7%.
This data from LMS’s November Remortgage Snapshot showed that 50% of those who remortgaged in November increased their mortgage loan size, with an average increase of £21,602. Meanwhile, 31% saw no change in their loan size, and 19% reduced their mortgage balance, with an average decrease of £14,429.
Regarding monthly payments, 56% of borrowers saw an increase, averaging £321.40, while a third experienced a reduction, averaging £358.11. 11% of those remortgaging saw no change in their payments.
Fixed-rate products dominated borrower preferences, with 47% opting for a five-year fix, 40% selecting a two-year fix, and only 5% choosing a three-year fixed product. A mere 1% chose a 10-year fix, and 2% opted for a tracker deal.
December activity
As expected, December saw a seasonal slowdown. The Bank of England held interest rates during its 19th December meeting, contributing to a 38% month-on-month decline in purchase mortgage searches, a 33% drop in remortgage searches, and a 35% fall in buy-to-let searches, according to Twenty7tec data.
However, on the day of the rate decision, Twenty7tec recorded a record number of available mortgage products at 24,264. Furthermore, despite the seasonal dip, December activity remained 10% higher than in December 2023, indicating potential momentum heading into January 2025.
The 2025 outlook
Many intermediary eyes were already set on 2025 as 2024 came to a close, especially in light of some encouraging forecasts from IMLA and UK Finance.
Focusing on 2024 figures, IMLA estimates that gross mortgage lending rose to £237.5 billion, up 6% compared to 2023. Lending for house purchase accounted for all the increase, rising £18 billion to £151 billion. Remortgaging declined by 6% to £78 billion and other lending rose slightly to £8.5 billion.
Looking ahead, gross mortgage lending is expected to increase to £275bn in 2025 (+16%), and further to £295bn in 2026 (+11%). House purchase lending is forecasted at £177bn in 2025 and £190bn in 2026, while remortgage lending is projected to rise from £88bn in 2025 to £94bn in 2026.
UK Finance echoes the positive sentiment, forecasting an 11% rise in gross mortgage lending in 2025 to £260bn. This includes a 10% increase in residential lending (£148bn) and a 30% rise in remortgaging (£76bn), with product transfers projected to grow by 13%.
A significant driver of these increases is expected to be the continued easing of affordability concerns. While interest rates are unlikely to return to ultra-low levels, forecasts suggest they will stabilise in a new normal range of 3%-4%.
Currently, the average new borrower allocates around 15.5% of their income toward mortgage interest. As rates decline, affordability is set to improve, unlocking more remortgage opportunities, particularly for the estimated 1.8 million borrowers reaching the end of fixed rate deals in 2025.
In short, the Q4 remortgage market reflected both the challenges of 2024 and encouraging signs of a more stable lending environment. As we enter 2025, there is cautious optimism, underpinned by improving affordability, a steadying rate environment, and increasing remortgage demand.
For intermediaries, this represents a key opportunity to support borrowers in navigating their options, securing competitive deals, and leveraging an evolving market landscape. With the intermediary share of mortgage lending set to grow further, those who stay informed and adaptable will be well-placed to capitalise on the shifting dynamics in Q1.
