Gross mortgage lending is expected to reach its highest level since the financial crisis in 2017, driven by a buoyant remortgage sector, according to the Intermediary Mortgage Lenders Association.
Imla predicts total gross mortgage lending will be £260bn this year - 5.9 per cent more than the £245bn recorded by the Council of Mortgage Lenders in 2016.
Net lending is also set to hit a post-2007 high of £45bn, while the total stock of mortgage debt will grow by 3.4 per cent, slightly outpacing the rate of disposable income growth expected by the Office for Budget Responsibility.
The remortgage market’s status as best performer is set to continue through 2017 and into 2018, as rising housing equity and record low mortgage rates encourage borrowers to switch deals.
Imla expects remortgage lending to reach £90bn in 2017 - 35 per cent of overall lending – before growing to a total of £92bn the following year.
The outlook for the buy-to-let sector is less positive, however, with gross lending set to decline by 6 per cent year-on-year to £38bn in 2017.
The sector has been struggling under the burden of tax hikes and regulatory changes, and buy-to-let lending for house purchase is expected to fall by nearly 17 per cent in 2017 to £12.4bn.
But Imla predicted the market has now bottomed out and buy-to-let lending will increase modestly to £40bn in 2018.
Peter Williams, Imla’s executive director, said: “Different segments of the mortgage market had contrasting years in 2016.
"The remortage market performed very well, with existing borrowers eager to take advantage of rising house prices and low rates by securing a new deal.
“However, with lenders increasingly encouraging product transfers, it will be interesting to see if the remortgage market maintains this momentum in the long-term.
“The buy-to-let market suffered under the changes introduced by the (former prime minister David) Cameron's government, but ultimately demand for private rented accommodation means that lending volumes are likely to rise again in the future.
“While the changes have certainly made things more difficult for landlords, property remains an attractive and comparably stable investment, which will support long-term growth in the sector.”
Greg Heath, managing director of Preston-based intermediary Derbyshire Booth, said: “Where we are, it is new purchase that is the big driver because we are having a building spurt at the moment.
“If you think about it, [the remortgage trend] makes sense because people will build up debt and then when they get the chance of a better deal they tend to consolidate to make their outgoings smaller.”
Mr Heath added that he expected business to continue at its current level as the Bank of England had acted to reduce some of the risks of Brexit.
simon.allin@ft.com
