In 2024, the mortgage market proved remarkably resilient, and “much stronger” when compared with last year, industry experts have said.
Looking back on what has been a changeable year for the sector, despite a shifting economic and political landscape, gross lending reached £1,670.9bn in Q3 – a 0.8% increase on the previous year, according to the Bank of England Lenders and Administrators Statistics Q3.
House prices also climbed, recording a 3.4% year-on-year rise that brought the average property value to £292,000 by October, according to the Office for National Statistics (ONS).
Driving this growth were falling mortgage rates and wage increases that finally outpaced inflation, making homeownership more attainable for many.
Yet the market has showed signs of recalibration in the closing months, with average asking prices dipping at the beginning December.
This seasonal slowdown was compounded by anticipation of Stamp Duty changes set to take effect in April, prompting cautious behaviour among buyers and sellers not likely to complete before the deadline.
“Stability and confidence are key,” noted Matthew Cumber, managing director at Countrywide Surveying Services.
Reflecting on the challenges of 2024, Cumber emphasised the difficulty of predicting market fluctuations and ensuring businesses were equipped with the right resources at the right time.
However, his optimism for 2025 was clear, as he added: “During conversations with leading UK lenders, they expressed confidence about the coming year.
“The resilience of the lending market is evident, and we are well-positioned to meet consumer demand.”
This sentiment was echoed by Hiten Ganatra, managing director of Visionary Finance and Mortimer Street Capital.
He said: “To build confidence in the UK housing market, a degree of stability is essential, but this year offered anything but.”
However, Ganatra highlighted the market’s resilience, with lenders eager to lend and borrowers increasingly confident to borrow.
Impactful events
Key events such as the General Election, changes to the Bank of England base rate, and the Autumn Budget left a lasting mark on the market.
Labour’s election victory brought a renewed focus on housing reforms, including commitments to expand affordable housing and streamline planning regulations.
Nick Hale, CEO of Movera, noted: “Labour’s ambitious housing agenda signals a promising shift, but challenges remain.
“Inflation and fluctuating interest rates are adding uncertainty for households and businesses alike.”
The Bank of England also took steps to stimulate the economy, reducing the base rate from 5.25% to 5% in August, followed by another cut to 4.75% in November.
Graham Sellar, head of the intermediary channel at Santander, said: “The reductions provided much-needed relief to borrowers, with rates now cheaper than at the start of the year.”
Sellar also noted that these adjustments bolstered borrowing capacity and spurred remortgaging activity.
However, Sellar also warned of potential volatility, adding: “The Autumn Budget’s decision to lower the Stamp Duty threshold to £125,000 in April 2025 could create a rush to complete deals beforehand, temporarily inflating prices.”
Persistent challenges
While inflation eased throughout the year, confusion persisted among borrowers about mortgage rates.
Kate Davies, executive director of the Intermediary Mortgage Lenders Association (IMLA), explained that while variable rates fell, fixed rates, influenced by swap rates, showed less consistency.
“It’s been a difficult message for advisers to explain,” she said.
“Borrowers often expect mortgage costs to fall in line with inflation and the Bank Base Rate, but market expectations dictate otherwise.”
Neal Jannels, managing director at One Mortgage System, highlighted the impact of fluctuating rates on both brokers and their clients.
“The abiding memory I will have of 2024 is the amount of rate changes across all lenders,” he said, emphasising the increased workloads for brokers rebroking cases and navigating rate adjustments.
Jannels pointed to the critical role of technology in addressing these challenges, noting that customer relationship management (CRM) systems have become invaluable tools in managing this complexity and ultimately benefiting end customers.
First-time buyers also faced significant challenges.
Karl Wilkinson, CEO of Access Financial Services, highlighted the mounting obstacles.
He said: “Rental accommodation is scarce and expensive, and the Autumn Budget offered little relief.
“There’s a pressing need for innovative solutions, such as a zero-deposit mortgage backed by a strong tech stack.”
Later life lending growth
A notable bright spot throughout the year was the continued growth in later life lending.
According to Richard Pike, chief sales and marketing officer at Phoebus Software, lending volumes to older borrowers rose significantly in 2024, with the value of loans increasing by nearly £1bn between Q1 and Q3.
“The later life market has shown consistent recovery, fuelled by innovative solutions and increasing consumer confidence,” Pike noted.
Leon Diamond, CEO of LiveMore, emphasised the sector’s potential, citing the emergence of diverse products tailored for borrowers aged 50 to 90-plus.
He said: “Over the course of 2024, I think that the seeds of understanding really started taking hold that ‘later life’ is becoming more mainstream due to our ageing demographic and changes to social structures.
“Later life no longer refers to a single product – equity release – but to a person who happens to be in their 50s, 60s or even 90s and might be better suited to a RIO, a standard interest-only mortgage or even a capital-and-interest mortgage, depending on their income.
“The later life market remains a highly underserved and massively growing market, with £200bn in interest-only mortgages set to expire over the next 10 years and the ‘Bank of Family’ projected to be worth £10bn by 2025 from a record £8.1bn in 2023.”
Looking ahead to 2025
As the year comes to a close, a cautious optimism prevailed among most commentators.
Pike observed that the second half of 2024 has seen increased consumer confidence and lender activity, creating a positive outlook for 2025.
However, he warned that rising debt and higher loan-to-values (LTVs) would require careful monitoring by lenders.
Cumber and Ganatra both highlighted the need for ongoing resilience and innovation.
Ganatra added: “Opportunities exist despite geopolitical uncertainties, with lenders keen to launch new products and borrowers eager to capitalise on favourable conditions.”
Jannels underscored the importance of technology in adapting to market demands and maintaining efficiency.
“A great CRM system can do a lot of the heavy lifting, minimising the time brokers spend rekeying and ensuring better outcomes for customers,” he explained.
Indeed, with the foundations of consumer confidence, improved technologies and economic intervention laid in 2024, the mortgage market appears well-positioned for sustained growth in 2025.
However, there is no doubt that further Government collaboration is needed in order to enact significant change in the market.
Hale said: “Policy stability and targeted affordability measures are essential for sustainable growth.
“Labour’s housing policies could lay the groundwork for a more inclusive market, but swift action is needed to bridge the affordability gap.”
Article from The Intermediary - Written by Jessica OConnor
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