Mortgage Market News

Mortgage lending expected to hit highs of £285 Bn: A path to growth

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Monday August 16, 2021

According to the Intermediary Mortgage Lenders Association (IMLA), gross mortgage lending is expected to reach a staggering £285 billion this year. In terms of borrowing values, the IMLA has predicted that borrowing values will surpass any record set since 2007.

The perpetual playoff between product transfers and remortgage continues, but improvements in digitising product transfers have strengthened its proposition. While remortgaging activity took a slump in 2021, the number of product transfers has risen to record levels, reaching the highest level of mortgage lending since 2007. The IMLA report findings demonstrate that most borrowers who need refinancing opt for a product transfer, mainly for convenience. Transferring a product online takes minimal effort and time, unlike remortgaging, which typically takes longer even though remortgaging can make a larger impact on homeowners’ financial savings.

Let’s look at three fundamental reasons the IMLA expects to see projected growth within the lending market for 2021.

Market Spikes: Predictions for Residential Property 

  1. First-Time Buyers

First-time buyers solutions have been one of the key focuses of the Government who are providing support helping to underpin new purchases. The ‘Help to Buy’ scheme is due to conclude in 2023. Turning renters into homeowners is one of the key reasons that IMLA have projected a growth path. First-time buyers are the most vulnerable to fluctuating interest rates and can benefit by taking a full fixed-rate mortgage to provide them with confidence that their mortgage payment cannot increase. However, first-time buyers should also be mindful that the longer your fixed-rate period lasts, the higher the interest rate will be. Two key schemes supported by the Government include:

An equity loan covers between 5% and up to 20% of the property purchase price for first-time buyers moving into a new build property. The property must be sold by a Help to Buy registered homebuilder. There are restrictions on the ‘maximum property purchase price’ limit for the home you buy depending on which region it’s in—ranging from £186,00 in the northeast and £600,000 in London. Find out more about the Help to Buy scheme here.

The Government has agreed to subsidise buyers’ 5% deposit, backing part of the loan themselves. Buyers take out a standard mortgage, and lenders can rest assured that the Government will cover a portion of the loan cost should the lender lose their money. The scheme has encouraged more lenders to re-enter the 95% market.

To read more about the 95% mortgage scheme, read our blog, the 5% deposit mortgages scheme.

  1. Stamp Duty Holiday Extension

Of course, we cannot ignore the success of the Stamp Duty Holiday scheme, which has been extended for a second time, with the deadline set for 30th September 2021. While some of these schemes are reported to have driven property prices up, the property market is a perpetual balancing act. Rather than leaving a stagnant market, schemes that appeal to socio-economic groups are vital to stimulate growth and increase market activity overrule the slight increase in property prices. When the property market landscape is in flux, appointing a mortgage advisor is even more critical. By seeking solid advice from a mortgage advisor that you can trust, you can certainly reduce your risk and learn from specialists in lending and borrowing in the housing market.

To read more about the Stamp Duty Land Tax holiday, read our blog here.

  1. Buy-to Let Growth: What Is The Cause Of A Spike in The Market 

Regarding buy-to-let lending, the IMLA expects 2021 to perform better than any other year since 2016, with £13 billion of house purchase buy-to-let lending. Gross buy-to-let lending is increasing to reach £40 billion in 2021 and £41 billion in 2022.

Our insights on the reshaping of the buy-to-let lending market, “What we are seeing is a wave of new entrants entering the market. Most lenders will still allow you to have two or four weeks of occupancy while keeping it regulated. While the buy to let lending market is fruitful, landlords must seek tax implications and how structuring a buy to let can affect lending rates.” interprets why the IMLA figures show significant growth in the buy-to-let market. “The key message here is that, while it’s true that there are lots of amateur landlords entering the buy-to-let market, the figures don’t necessarily reflect growth in new buy-to-let landlords, but an increase in refinancing buy-to-let-properties.”

Ensuring buy-to-let schemes work for the landlord’s from a tax perspective is essential for success.

As a result of the Thanks to Government initiatives, a successful rollout of the vaccine and the UK economy rebounding as Covid restrictions ease, Britain’s housing market expects sustained growth within the property industry for decades to come.

If you are a buy-to-let landlord seeking professional advice, call 020 7519 4900 today to get in touch with our team of specialist advisers, who are adept at navigating the buy-to-let market.

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