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New norm for mortgage lending market revealed

New norm for mortgage lending market revealed

Mortgage lending growth is forecast to continue despite the uncertainties surrounding Brexit, according to a trade body's analysis of the market.

The annual mortgage market review from the Intermediary Mortgage Lenders' Association (Imla) showed a variety of trends within the mortgage market, including the fact that people are moving far less often and that funds borrowed for house purchases have fallen below pre-financial crisis levels.

The trade body stated these changes to borrowing are structural rather than cyclical, due to a chronic supply shortage and an ageing population.

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Homeowners now move only once every 19.2 years, compared with 7.4 years in 1988.

The average age of a homeowner has increased from 52 in 1996 to 57 in 2016, which is faster than the average rate of ageing in the UK.

Despite these factors Kate Davies, executive director of Imla, stated mortgage lending was set to continue to grow.

She suggested gross mortgage lending will reach £265bn with net mortgage lending of £47bn, while remortgage activity will continue to be more buoyant than lending for house purchase, with total remortgaging reaching £94bn, up 4.4 percentage points.

She also forecast that gross buy-to-let lending will recover in 2018 and 2019 despite the adverse tax changes for landlords.

Ms Davies said this prediction not only reflected continued strong remortgage activity but an improvement in house purchase lending brought about by a higher level of churn in the market.

She said: "While the mortgage market currently appears resilient, it is clear that a number of structural factors have been changing our perceptions of what 'normal' looks like.

"We are witnessing a step-change in the market, as the shifting demographics of homeownership and the housing supply shortage create a structural break with what has been the norm.

"Despite the recovery of the housing market and the availability of mortgage finance since the last recession, stricter affordability rules are limiting activity by those who would otherwise be highly leveraged. 

"Transactions levels have fallen and there is evidence of more cash being injected into home purchase.  People are moving less often – whether by choice or constraint."

Bob Riach, mortgage broker at Riach Financial in Scunthorpe, said the market in this area was exceptionally buoyant, particularly at the first-time buyer level.

He said: "It has been really busy. Properties at the bottom end are selling in a matter of weeks, although the top end is slower."

He added that most buyers seemed unconcerned about Brexit, and were still taking shorter fixed rates rather than longer ones.