"Brokers will no doubt welcome a shift in emphasis from product transfers to remortgaging"
The body predicts that the share of mortgage business done via intermediaries will continue to grow from from 87% in 2024 to 89% in 2025 and 91% in 2026.
Other key predictions include an increase in gross mortgage lending from £237.5bn in 2024 to £275 billion in 2025 (a rise of 16%), growing further to £295bn in 2026 (up 11%), with house purchase lending of £177bn and £190bn respectively, and remortgaging of £88bn then £94bn. These increases are driven by lower interest rates and a rise in remortgage demand as affordability concerns ease off - but the report warns that there will be 'no return to the ultra-low interest rate environment', with rates predicted to settle in a new normal between 3% and 4%.
In terms of affordability, the average new borrower currently spends around 15.5% of their income on mortgage interest. That figure is set to fall slightly as rates come down, modestly improving affordability and opening up more remortgage opportunities for the 1.8m borrowers coming to the end of a fixed-rate deal in 2025.
IMLA expects 70% of the growth in gross mortgage lending to come from advances for house purchases (£177bn), while remortgage activity will rebound by 13% to £88bn.
IMLA also predicts a rise of 14% in buy-to-let lending to £38bn and £42bn in 2026 (up 11%). This growth will be supported by improved affordability for landlords as rates fall while rents carry on increasing, due to the structural supply/demand imbalance in the private rented sector. The rise in the stamp duty charge for additional properties announced in the Budget will slightly reduce the flow of new landlord purchases, while fears around the Renters’ Reform Bill may prompt some to sell up, deepening the imbalance and forcing rents up further.
Contrary to predictions made this time last year, arrears of more than 2.5% of loan balances started falling in Q3 2024 and we expect them to carry on this downward trajectory from 0.98% of accounts at the end of 2024 to 0.94% by the end of 2025, with a further fall to 0.85% in 2026.
Kate Davies, executive director of IMLA, said:
“After a period of economic volatility, high inflation, rising borrowing costs and great uncertainty, the environment feels rather more settled, and the housing and mortgage markets are coping surprisingly well with the ‘new normal’, after the ultra-low interest rates of the last decade.
“2025 looks to be a year of greater stability and modest but welcome growth. Brokers will no doubt welcome a shift in emphasis from product transfers to remortgaging, and the opportunity that offers to fully assess their clients’ needs and scour the market for the most suitable solutions.
“Buy-to-let landlords continue to face the challenge of increased regulation and higher taxes. and will be looking to run their property businesses as efficiently as possible. Many will rely on professional guidance in this endeavour.
“With decreasing interest rates and almost a third of remortgagors coming off fixed deals faced with lower-cost mortgages in 2025, arrears will continue to fall from their very low base. This is good news for borrowers and lenders alike, and reflects both the effectiveness of lenders’ initial underwriting procedures and also their flexibility in helping borrowers who get into difficulty.
“In a growing and increasingly competitive market, in 2025 mortgage advisers will play an even greater role in helping borrowers find the optimal solutions for their individual needs, with the share of business going through intermediaries set to break the 90% barrier in 2026 for the first time in the history of the market.”
