Mortgage intermediaries will take a share of 91% of business by 2026, it has been predicted by a trade body.
The latest report from the Intermediary Mortgage Lenders Association (IMLA), The new ‘normal’ – prospects for 2025 and 2026, suggested that the rise in intermediary-led mortgage business had slowed but was still on an upward trend.
This is expected to go up from 87% this year to 89% next year.
IMLA said intermediaries taking more than a 90% share of mortgage business was happening later than originally forecast.
Borrowers will return to remortgaging
The organisation also said gross mortgage lending would go up from £237.5bn this year to £275bn in 2025, representing a 16% increase. This would continue to increase further to £295bn, with house purchases accounting for £177bn and £190bn of lending respectively.
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Meanwhile, remortgaging will make up £88bn and £94bn of business respectively.
IMLA said the rise in lending would be supported by lower interest rates and an increased demand for remortgaging as affordability eased.
The organisation said the trend of people going for product transfers had reversed this year, and improved affordability would result in a larger rise in remortgage business in 2025.
A rebound in BTL lending
IMLA said 2024 laid the grounds for a recovery in gross buy-to-let (BTL) lending as interest rates fell, rents remained high and tenant demand was healthy.
It forecasts a 14% rise in BTL lending next year to £38bn, then another increase to £42bn in 2026.
However, it said the Renters’ Rights Bill and higher stamp duty surcharge could pose a challenge for landlords. The organisation suggested this could lead to landlords selling up, which would worsen supply and result in higher rents.
Interest rates pass their peak
IMLA said after the mini Budget, the economy had stabilised and it was easier to see what the ‘new normal’ looked like.
It said there would be no return to the ultra-low interest rate environment seen in the past, and interest rates seemed to have passed their peak and would probably settle between 3% and 4%.
IMLA said the average new borrower currently spent around 15.5% of their income on mortgage interest, and this figure was set to fall along with interest rates.
It said this would open up remortgage opportunities for the 1.8 million deals maturing next year.
IMLA said the predicted sharp rise in mortgage arrears did not materialise this year, and instead, arrears of more than 2.5% of the outstanding balance started to fall in Q3.
This is expected to keep dropping from 0.98% of all mortgages at the end of this year to 0.94% in 2025, then 0.85% in 2026.
It said even though some borrowers were yet to go through a repricing, nearly a third who are refinancing next year will see their interest rate fall.
However, there may be a rise in possessions over the next two years due to a backlog of longer-term arrears.
Kate Davies (pictured), executive director of IMLA, said: “After a period of economic volatility, high inflation, rising borrowing costs and great uncertainty, the environment feels rather more settled, and the housing and mortgage markets are coping surprisingly well with the ‘new normal’, after the ultra-low interest rates of the last decade.
“2025 looks to be a year of greater stability and modest but welcome growth. Brokers will no doubt welcome a shift in emphasis from product transfers to remortgaging, and the opportunity that offers to fully assess their clients’ needs and scour the market for the most suitable solutions.”
She added: “Buy-to-let landlords continue to face the challenge of increased regulation and higher taxes, and will be looking to run their property businesses as efficiently as possible. Many will rely on professional guidance in this endeavour.
“With decreasing interest rates and almost a third of remortgagors coming off fixed deals faced with lower-cost mortgages in 2025, arrears will continue to fall from their very low base. This is good news for borrowers and lenders alike, and reflects both the effectiveness of lenders’ initial underwriting procedures and also their flexibility in helping borrowers who get into difficulty.
“In a growing and increasingly competitive market, in 2025, mortgage advisers will play an even greater role in helping borrowers find the optimal solutions for their individual needs, with the share of business going through intermediaries set to break the 90% barrier in 2026 for the first time in the history of the market.”
