Mortgage lending forecasted to rise by 11% in 2025

UK Finance has predicted that mortgage lending is set to rise by 11% in 2025

UK Finance says that with rate and cost pressures continuing to ease, the outlook for 2025 is for a gradual improvement in mortgage affordability, feeding into market growth. As interest rates tick down, we expect arrears to continue to fall, with tailored forbearance helping those who need it.

Throughout 2024, lower inflation, rising real wages and gradual cuts in mortgage offer rates began to ease the affordability constraints which held back the market in 2023. This led to modest annual growth in lending for house purchases, although refinancing markets remained subdued. Arrears levels have been helped by prudent lending standards, extensive lender forbearance and low unemployment.

The number of customers falling behind on their mortgages looks to have peaked early in 2024 before falling back. While the number of properties taken into possession has risen, this is largely due to historic arrears cases now working through the court system and the numbers are very low compared to historic norms. James Tatch, Head of Analytics at UK Finance, said “The mortgage market showed greater than previously expected resilience in 2024 as cost and rate pressures began to recede. Affordability constraints did impact external remortgage activity, but strong competition to retain customers meant those coming off fixed rates could find a new internal product transfer deal without needing a new affordability test.

“In 2025 we are forecasting continued steady growth in both house purchase and remortgage lending as affordability improves further. We are however forecasting a slight fall in buy-to-let lending in 2025.

“The prudent underwriting standards in place for the past decade have helped most customers who might have fallen into difficultly. Arrears look to have peaked early in 2024 before falling back, and we expect them to fall again in 2025.”

2024 year on year change compared to 2023

Gross Lending	£235 billion	+4 per cent
Lending for house purchase	£135 billion	+11 per cent
External remortgaging	£59 billion	-10 per cent
New buy to let purchase lending	£10 billion	+13 per cent
Internal product transfer	£224 billion	-7 per cent
Arrears	104,200	-3 per cent

2025 predicted year on year change compared to 2024

Gross Lending	£260 billion	+11 per cent
Lending for house purchase	£148 billion	+10 per cent
External remortgaging	£76 billion	+ 30 per cent
New buy to let purchase lending	£9 billion	-7 per cent
Internal product transfer	£254 billion	+13 per cent
Arrears	99,000	-5 per cent