Apart from the first month or so of 2024, it was hard to discern a huge amount of positivity around the UK mortgage market through the rest of the calendar year.
Which is why, with 2024 out of the way, the recently announced lending figures might well come as something of a surprise to many, even us seasoned stakeholders.
UK Finance believe gross lending hit £235bn last year, up 4% on 2023, however house purchase business was accountable for pretty much all the improvement, up 11% to £135bn, with buy-to-let purchase lending also up 10% to £10bn.
In a year when remortgaging and product transfer (PT) business fell, you can perhaps understand why the trade body is also anticipating 2025 will be a further strong year for residential purchasing at least.
UK Finance predict overall gross lending will move up 11% to £260bn, with house purchase lending accounting for £148bn, up 10%. At the same time it does argue that buy-to-let purchasing will slip to £9bn, which is actually in contrast to what IMLA predicts, but that is perhaps a story for another day.
Focusing much more on residential purchase activity, it can be proven that even with the mood music being less than jaunty around the mortgage market through 2024, it – and those who want to purchase/move – has shown a significant resilience, helped of course by falling rates and improved affordability.
And, perhaps no other borrower demographic has exhibited these characteristics in such spades as first-time buyers, who continue to lead the way in terms of purchasing.
Of course, the big question as we kick off 2025, is whether first-timers will show up in the same number over the entirety of the year, or as many anticipate, will we see a lot of business crammed into the first quarter by dint of the stamp duty changes which will make it more expensive for some would-be purchasers when the thresholds return to their previous level from April?
My own view is that, quite rightly, where it is possible, first-timers are going to try and take advantage of the current stamp duty rules simply because they will pay less tax now, than they are likely to from April.
We all know that stamp duty levels undoubtedly influence the market, and therefore we might well anticipate a busy few months – certainly for conveyancers who are going to be charged with completing these purchases before stamp duty shifts back.
However, by the time that happens, we might well have seen some further (and market-shifting) moves in terms of rates, which are also likely to prick up the ear of many would-be first-timers, who are going to encounter a market much more favourable to them – from an affordability point of view – than they would have been dealing with in the last couple of years.
We should not underestimate how positive those moves could be, allowing new purchasers a chance at buying a home/securing the mortgage level they need, which might well have been completely out of reach for them in a higher-rate environment.
Now, we know that nothing is certain in the ‘rate game’ but if we do see the Bank of England cutting BBR – the markets appear to be betting on four quarter-point cuts this year – and swaps also move to reflect a more benign rate environment, then this will be passed on by lenders looking to secure long-term mortgage relationships with those at the start of their property-owning journey.
What will clearly also help in this regard is either a renewed, or improved, focus on the delivery of high LTV mortgages, particularly at price points not way above what is achievable for bigger deposits.
As we know, bigger deposits tend to be the preserve of those who can access the Bank of Mum & Dad, and we should not be happy with a situation which only allows those benefiting from the largesse of parents/grandparents, to get into a property of their own.
Over the course of 2024, high LTV product choice remained pretty stable around the mid-200 mark, and pricing did reflect the cuts we saw, but it’s still the case that not all lenders are comfortable in this space, and those that are, will often price higher for the greater risk they believe they are taking on.
We know that the new Government has maintained the mortgage guarantee scheme, but there are far better options for lenders to mitigate risk with private mortgage insurance, which allows them to market higher LTV products to more first-timers, to be flexible, more cost-effective and to also price more competitively.
Overall, if 2025 is to follow the trend, then the first-time buyer market will certainly need an engaged lending community operating in the high LTV space, specifically to address those who have saved an adequate deposit but are not able to muster 15/20% levels.
They deserve competitively-priced mortgages as much as the next borrower and it’s up to lenders to ensure they remain engaged and competitive in this space to help them onto the ladder.
