"The mortgage market shook off uncertainty and turbulence to register another solid year in 2016, and IMLA predicts that the market is set to do the same again in 2017."
IMLA predicts that total gross mortgage lending will reach £260bn in 2017, 5.9% higher than the £245bn recorded by the CML in 2016.
Meanwhile, IMLA expects net mortgage lending to hit £45bn this year, also the highest level recorded since 2007.
IMLA says that like the broader economy, the mortgage market has been "resilient" in the wake of the macroeconomic uncertainty resulting from the Brexit vote, adding that the imbalance between supply and demand has contributed to the strength of the market.
Borrowers have also benefitted from modest rises in inflation coupled with a low Bank of England Base Rate, which have improved mortgage affordability and made consumers more relaxed about taking on greater levels of debt.
This improving affordability is illustrated by the fact that the amount borrowers spend on paying off mortgage interest is at a low; in 2016 home movers spent an average of 7.2% of their income on interest payments, while first-time buyers spent an average of 9.1%. With the Bank of England Base Rate unlikely to rise soon, and the economic outlook remaining stable, IMLA says these good conditions are likely to persist and contribute to continued growth in mortgage lending.
The Association also predicts that the remortgage market will continue to be the most buoyant part of the market over the remainder of 2017 and into 2018. In total, IMLA expects remortgage lending to reach £90bn in 2017, which is 35% of overall lending. In 2018, remortgage lending is forecast to grow to a total of £92bn.
Gross buy-to-let lending is expected to decline by 6% year-on-year to £38bn in 2017, driven by a fall in buy-to-let lending for house purchase, which IMLA expects will fall by nearly 17% in 2017 to £12.4bn. However, IMLA believes that the buy-to-let market has bottomed out, and that lending will rise modestly to £40bn in 2018.
While the recent policy changes are likely to continue slowing buy-to-let lending for purchase, IMLA says they could stimulate buy-to-let remortgage lending as the restriction on the deduction of mortgage interest will increase higher rate taxpayers’ incentive to seek out lower mortgage rates. In 2016, buy-to-let remortgage lending hit a record £25bn, which represents 62% of all buy-to-let lending and 31% of all remortgage lending.
Peter Williams, IMLA’s Executive Director, commented: “The mortgage market shook off uncertainty and turbulence to register another solid year in 2016, and IMLA predicts that the market is set to do the same again in 2017. There are many factors that have contributed to the continued strength of the mortgage market and are likely to support its growth over the rest the year. The market has been supported by high levels of public demand for housing from a variety of different customer profiles. Furthermore, low mortgage rates and relatively modest levels of inflation have instilled borrowers with confidence, and made them willing to take out loans for purchase.
“Looking ahead, this momentum in the market is unlikely to be derailed any time soon. While the General Election in June could lead to further uncertainty, and the outcome of the Brexit negotiations are still unclear, the mortgage market is in rude health and the strong fundamentals underpinning it are unlikely to change.”
