Mortgage market growth to continue despite disruption, says Imla

Mortgage market growth to continue despite disruption, says Imla
Credit: Jason Alden/Bloomberg

Growth in the mortgage market is set to continue this year despite ongoing coronavirus disruption, according to a report by the Intermediary Mortgage Lenders Association (IMLA).

The trade association said it expected property prices to keep rising this year and next, even with the end of the stamp duty holiday, in part due to low mortgage rates and a backlog of delayed transactions being cleared from last year.

Kate Davies, executive director at IMLA, said: “Many have predicted doom and gloom for the housing market since the crisis began. However, our analysis shows there is room for more optimistic thinking.

“Since the first lockdown back in March, the mortgage market has shown remarkable resilience. Spending more time at home has led many to reconsider their living arrangements, helping to boost demand for homes across the UK.

“This surge in interest has been supported by the government’s stimulus package, which in most cases has helped to support individuals far better than has been the case in previous financial crises. The combination of these factors leads us to believe that 2021 will be a year of modest growth for the housing and mortgage markets.”

While Imla warned there was “considerable concern” about the level of activity in the housing market after the end of the stamp duty holiday and the knock-on effect this could have on house prices, it said with first-time buyers paying no stamp duty up to £300,000 from April 1 as before the stamp duty holiday, the number of first-time buyers could rise after March if lenders returned “more fully” to high LTV lending.

Other industry figures have also predicted the housing market will remain strong after the stamp duty holiday.

Data from Moneyfacts has shown the number of mortgages at 90 per cent LTV saw the largest monthly growth in availability in January.

Ms Davies has previously predicted the five-year anniversary of the stamp duty surcharge would enable demand in the mortgage market to stay strong this year despite the end of the stamp duty holiday.

A survey by Paragon Bank also found that half of buy-to-let brokers would focus on five-year remortgage business when the stamp duty holiday ends.

Intermediary market share

However, IMLA predicted lending via intermediaries to fall slightly from the “exceptional” levels seen in 2020.

According to the association, intermediaries’ share of mortgage lending reached 80 per cent for the first time in April, and averaged an estimated 79 per cent across the year, citing intermediaries’ ability to work flexibly during the pandemic, such as increased use of video conferencing, as key drivers.

But it predicted the intermediary share to fall to 78 per cent in 2021, with the pandemic likely to be “less of an issue” later this year and lenders’ direct distribution possibly recovering a small amount of its lost share.

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