"Intermediaries are continuing to play a particularly important role in the sector, helping borrowers to find the mortgages they need as they try to move onto or up the ladder"
Despite geopolitical and economic uncertainty, a new report from IMLA shows that the mortgage market has remained resilient throughout 2022.
Gross lending is expected to reach £310bn this year, slightly above 2021’s strong performance. The figure has been driven by high levels of remortgaging, which account for more than a third of gross lending. The buy-to-let market has also had a record year, with an estimated gross lending figure of £56bn.
The lion’s share of mortgage business in 2022 has been conducted through intermediaries, with their share of distribution rising from 80% to 84%. IMLA expects this share of the market to grow to 90% by 2024.
IMLA says inflation will be a key factor determining the UK mortgage market’s prospects over the next two years. The report predicts that higher interest rates will result in gross mortgage lending falling to £265bn in 2023 and £250bn in 2024. Buy-to-let lending will also fall to £47bn in 2023 as a tougher economy weighs on the market.
The report does suggest that in some respects the effects of the cost of living crisis on homeowners may not be as severe as expected. IMLA predicts that the number of households in negative equity will only reach 16,000 by Q4 2024, with an average negative figure of £4,300 per household, despite many experts drawing comparisons between the current situation and the housing downturn of the 1990s, when up to 1.8 million households were in negative equity. This is due to a lower proportion of lending at high LTVs, rapid house price rises since the Covid-19 pandemic, and a greater uptake of capital repayment mortgages, meaning more borrowers have paid down their mortgage balance. These factors, combined with more rigorous lending criteria and enhanced lender forbearance, mean that actual possessions figures are expected to be less than half those reported in 2009.
Kate Davies, executive director of IMLA, commented: “After two years of global economic turmoil caused by Covid-19, 2022 was widely expected to be a year of recovery and a return to stability. However, the new normal appears to be uncertainty, with lockdowns in China continuing to impact supply chains, Russia’s invasion of Ukraine triggering rapid rises in energy prices, and political upheaval in the UK directly affecting mortgage rates.
“Yet, even in this context the mortgage market has remained resilient, with gross lending likely to reach £310bn by the end of 2022. Our report also shows that intermediaries are continuing to play a particularly important role in the sector, helping borrowers to find the mortgages they need as they try to move onto or up the ladder, or remortgage at a time when rates are higher than in recent years.
“Looking ahead, there will continue to be significant challenges facing the mortgage sector and wider economy. We expect persistent inflation and the Bank of England response to weigh on the market, which will have an impact on lending as buyers choose to hold off on moving home or investing in a buy-to-let property. However, where buyers are looking to secure their next mortgage, we have no doubt that the intermediary market will continue to support consumers and that a growing number of people will be turning to brokers to help them navigate the mortgage journey in these uncertain times.”
