The Intermediary – February 2025 - Flipbook - Page 10
RESIDENTIAL
Opinion
Four reasons to be
optimistic in 2025
I
t’s been a turbulent couple of
years for our sector. Rising
interest rates and cost-ofliving pressures weighed
heavily on borrowers, leading
to one of the most challenging
markets in nearly a decade.
However, there is enough evidence
to suggest that the market is over
the worst. Consumer confidence is
steadily returning, lender competition
is fierce, and we have a Government
in power that says it’s determined to
boost housing supply.
While we’re not out of the woods
yet, those are certainly tailwinds for
the market – and, as a result, we are
starting to see green shoots appear.
With that, here are four reasons
why we should be optimistic about the
outlook for 2025.
A growing market
The mortgage market had been on an
incredible run through much of the
2010s, growing for nine consecutive
years to a post-Global Financial Crisis
peak of £322bn in 2022.
However, soaring interest rates
brought that progress to a juddering
halt, with lending sliding more than
30% to £225bn in 2023.
Thankfully, the market rebounded
last year, growing 4% to £235bn – and
it is expected to continue that upward
trajectory in 2025.
UK Finance predicts that lending
will rise a further 11% to £260bn this
year, with Zoopla forecasting a 5%
uptick in housing transactions to
1.15 million.
That’s some way off the 2023 lending
figure, but it’s progress, nonetheless.
And if those predictions prove correct,
brokers should see their revenues rise
again this year.
the next 12 months. Depending on
who you ask, the base rate is expected
to fall from 4.75% to between 3.5% and
4% next year, unless inflation proves
stickier than expected.
While the base rate has, at best, an
indirect effect on the price of fixed
rate mortgages, a reduction in the
benchmark rate should lead to lower
mortgage rates for borrowers.
At the time of writing, the average
2-year fixed rate was 5.52%, while
the average 5-year fix was 5.58%,
according to Moneyfacts.
If the base rate comes down
by another percentage point, as
hoped, we could well see average
mortgage rates in the 4% to 5% range
again in 2025.
Improving availability
Product availability is a good indicator
of lender appetite. On that basis, the
signs look positive for the early part
of 2025.
According to Moneyfacts, there
were 6,486 products on the market
in December, up from 6,402 the
month before.
While that is lower than the 6,629
reported in June last year, the shelves
are overflowing relative to December
2022, when there were just 3,730
products available to borrowers.
All the lenders I regularly speak to
are hungry to lend in 2025, so I expect
product availability to remain strong
over the coming year. Therefore, most
borrowers should be well catered for.
Mortgage rates
While mortgage rates increased in
December, the cost of borrowing is
expected to fall over the course of 2025,
which should help drive activity over
10
The Intermediary | February 2025
Ideal balance: Borrowers will be in a better position
ROB CLIFFORD
is chief executive
at Stonebridge
UK Finance predicts
that lending will rise a
further 11% to £260bn
this year, with Zoopla
forecasting a 5% uptick in
housing transactions to
1.15 million”
Moreover, I suspect that when
rates sele next year, lenders will
review lending criteria in a bid to win
more business at the right margin.
That’ll be a win-win for brokers and
borrowers alike.
Borrower resilience
One of the things that has struck me
over the past couple of years is how
well borrowers have weathered the
higher rate environment.
Currently, there are around 93,630
borrowers in arrears of 2.5% or more
of the outstanding balance, according
to UK Finance.
While that may sound like a lot,
it only represents around 1% of all
open mortgage accounts. If you go
back to 2009, in the wake of the
Global Financial Crisis, the number
of borrowers who fell behind on their
repayments exceeded 288,000 – or
2.5% of all mortgage holders.
With inflation now much lower
than it was and the cost of borrowing
expected to fall, I am confident
borrowers will feel in a beer financial
position this time next year. As ever,
it falls to firms and their brokers to
make the most of the opportunities
this year will present. ●
