It’s going to be a busy and exciting 2025 according to a leading industry organisation.
The share of mortgage business conducted through intermediaries will rise from 87% in 2024 to 89% in 2025 and 91% in 2026.
That’s the view of a new report from the Intermediary Mortgage Lenders Association (IMLA).
Other key predictions include an increase in gross mortgage lending from £237.5 billion 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.
The increase in lending will be underpinned by lower interest rates and a rise in demand for remortgaging as affordability pressures ease.
The report observes that, as the economy has gradually stabilized post-Truss, we are getting a clearer picture of what the ‘new normal’ looks like, and there will be no return to the ultra-low-interest-rate environment we enjoyed in the 10 years to 2022. But interest rates have passed their peak and look likely to settle 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, says: “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.”
