Mortgage market to slow in 2023 and 2024 but borrowers remain resilient in the face of global upheavals, IMLA report predicts

21 December 2022

  • The Intermediary Mortgage Lenders Association (IMLA) has published its “New ‘normal’ – prospects for 2023 and 2024” report, predicting mortgage market performance in 2023 and 2024
  • Last year, IMLA forecast gross lending in 2022 of £275bn. Current estimated outturn for the year is £310bn, slightly up on 2021’s strong performance despite global upheavals and higher interest rates
  • IMLA forecasts gross lending in 2023 of £265bn, falling to £250bn in 2024
  • In 2022, 84% of mortgage business was conducted through mortgage intermediaries: IMLA predicts that this share of distribution could rise as high as 90%

Despite geopolitical and economic uncertainty, IMLA’s report 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 re-mortgaging, 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%, reflecting the advantages of lenders using these channels – namely lower fixed costs and the flexibility to control volumes. IMLA expects this share of the market to grow to 90% by 2024.

Inflation will be a key factor determining the UK mortgage market’s prospects over the next two years. If CPI inflation remains above the Bank of England’s target in 2024, the Bank will remain under pressure to maintain or adjust the base rate in order to control inflation.

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, IMLA, comments

“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.”

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Notes to Editors

About IMLA

The Intermediary Mortgage Lenders Association (IMLA) is the trade association that represents mortgage lenders who lend to UK consumers and businesses wholly or predominantly via the broker channel. Its membership of 52 banks, building societies and specialist lenders include 18 of the 20 largest UK mortgage lenders (measured by gross lending) and account for approximately 93% of gross mortgage lending.

IMLA provides a unique, democratic forum where intermediary lenders can work together with industry, regulators and government on initiatives to support a stable and inclusive mortgage market.

Originally founded in 1988, IMLA has close working relationships with key stakeholders including the Association of Mortgage Intermediaries (AMI), Building Societies Association, UK Finance and the Financial Conduct Authority (FCA).

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