Mortgage Lending Will Rise Owing To Less Political Uncertainty

The Intermediary Mortgage Lenders Association (IMLA) has predicted the mortgage market will bounce back in 2020 and 2021.

With the election done and dusted in December 2019 and more certainty over Brexit, Brits will have more confidence in the housing market in the next two years owing to reduced levels of economic and political doubt.

The ‘New Normal’ report from the association forecast that gross mortgage lending will increase by 1.4% to £268bn in 2020, rising to £275bn in 2021. The growth will be largely driven by lending for house purchases.

The latest UK Finance Mortgage Trends data released this week also revealed a turbulent and challenging 2019 for conveyancers.

According to the Mortgage Lenders Association data, mortgage lending dropped by between 1-2% in 2019, reaching an estimated £264bn.

Kate Davies, executive director of the Intermediary Mortgage Lenders Association, said:

“The next two years certainly look positive for the mortgage market.

“In 2019 the sector remained resilient in the face of ongoing political uncertainty, but our report shows that a boost in consumer confidence is likely to support modest growth over the next two years.

“Intermediaries are driving a large part of that growth as borrowers continue to seek out the expertise of advisers to help them find a mortgage.”

In 2020, IMLA expects intermediaries to increase their market share to nearly 80% of all mortgage transactions, which is a touch better than 2019.

However, remortgaging is expected to be subdued in 2020 and 2021 at £100bn as more borrowers move from their existing mortgage deal to a new one and an increase of 5-year fixed rate mortgages will be taken advantage of by borrowers too.

The number of product transfers grew by 13.3% between Q1 2018 and Q3 2019 and the report predicts that this area of the market will grow again by 4% in 2020 to £172bn and a further 2% in 2021 to £176bn.

In addition, IMLA’s report also forecasts that the buy-to-let market will continue to decline (to £40bn in 2020 and £39bn in 2021) due to tax relief for landlords being eradicated in April this year.

Davies added:

“Although we expect modest growth for the mortgage market over the next two years, Britain’s housing market is still far from perfect. The Buy-to-Let sector continues to be under pressure from a spate of tax and regulatory measures enacted over the last five years and IMLA continues to call for a moratorium on any further changes to the Private Rented Sector.

“The planned restriction and eventual closure of Help to Buy also requires the industry to consider new ideas. More than 200,000 housing transactions have been supported by Help to Buy equity loans since their launch and without suitable alternatives first-time buyers will have fewer Alternatives.

“IMLA believes that the new government should encourage the industry to embrace innovative solutions that could replace Help to Buy, bringing together lenders, housebuilders and the regulator to identify what could take the place of the scheme.”

Other challenges that Brits are faced with are retiring debt free. More than one in three people who will retire this year will endure the strain of substantial debts to clear when they should be enjoying their retirement with no stress, according to new research by Key.

The debts encompass owing money to credit cards (48%), outstanding bank loans (31%) and remaining mortgage left to pay (14%).

The typical average amount owed by those in debt is £17,460, 8% owe over £20,000 and 4% have no idea how much they are in debt.

One in eight of those in debt expect to owe money for nine years or more with a third of them believing they will never be able to pay debt off.

Will Hale, CEO of Key, said: 

“With changes to the state pension due to start coming into effect this year, it is vitally important to understand the challenges and aspirations of the ‘Retirement Class of 2020’.

“The findings suggest that while most people work hard to retire debt-free, this is not the reality for one in three people who need to consider how they can service and repay over £17,000 in borrowing from their retirement nest egg.

“Even those with generous incomes may find this a stretch and people are taking an average of three-and-a-half years to clear the debts they retired with – at a time when they should be enjoying an active retirement and worrying less.

“Equity release is not right for everyone but it is vitally important that people are not prevented from considering how their largest asset, their home, can support them in retirement by misconceptions and unanswered questions concerning later life lending options. There is a lot of help available online on how to budget for retirement and working with a financial adviser in the run-up to retirement can make a massive difference in being as retirement ready as possible.”

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