AMI predicts pre-crisis mortgage lending in 2018 despite rate rise

The Association of Mortgage Intermediaries predicts that gross mortgage lending will supersede 2007’s peak of £365 billion in 2018, despite expectations of at least one base rate rise.

Related topics:  Mortgages
Rozi Jones
24th April 2018
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"AMI believes 2018 will be the strongest year for the mortgage market since its peak in 2007"

In spite of relatively subdued confidence and activity figures, AMI believes 2018 will be the strongest year for the mortgage market since its peak in 2007, largely due to a significant focus on product transfers by lenders aiming to preserve margins by keeping refinance costs down on existing book loans.

In its latest quarterly economic bulletin, the AMI says it expects to see around £270 billion in gross residential mortgage lending across purchase, remortgage and further advances in 2018, along with a growing product transfer market which could hit £140 billion.

The AMI also predicts two base rate rises by the end of 2019, the first occuring in 2018 with a 60% probability of it occurring in May, 75% certainty by August and 90% probability by November 2018.

However it says economic data suggests "good reason for the Bank of England to be wary of raising the base rate too far too fast".

The Association said that should nothing occur to dent confidence and investment further, a 0.5% rise in the base rate by the end of 2019 would seem most likely and achievable, but there is "still the very real possibility that Brexit throws this off course completely".

The AMI raised concerns that a further base rate rise in May could put enough pressure on finances at the lower end of the affordability scale that there would be "a rise in arrears rates at the very least, whether or not this feeds through to possessions".

At the other end of the scale however, the AMI believes a rise in the base rate would ease pressure on stress-testing undertaken by lenders assessing new mortgage applications, which could help to improve affordability for borrowers with more stable finances.

Additionally, the Association noted an increase in appetite to lend to the self-employed and more complex income borrowers, even among more mainstream lenders.

It concluded that the balance of lending is "increasingly healthier with recently under-served customer profiles now being given more choice".

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