Mortgage lending will grow in the next four years, predicts a report by Timetric, which states that wider economic recovery, a rise in house building and demand-based incentives for the purchase of newly built properties will cause a healthier appetite for buying.
The report says that the fastest growth in mortgage lending will be in 2017, with an estimated rate of 11.7%. This is mostly due to the Office for Budget Responsibility expecting to see the largest rise in UK house prices over this period.
Timetric forecasts a total of £218.6 billion in gross lending in 2015, before growing to £241.6 billion in 2016 and hitting £286.8 billion in 2019.
However, outstanding mortgage balances are expected to grow at a slower pace. Repayments are likely to rise as stronger economic growth causes an increase in the Bank of England (BoE) base rate and therefore higher mortgage interest rates.
Outstanding balances are forecast to reach £1.33 trillion by the end of this year and £1.39 trillion by 2019.
An analyst at Timetric, Ben Carey-Evans, says: “Rising interest rates, combined with reduced growth in the UK housing market, is set to stunt increases somewhat from the 15% and 22% rates seen in 2014 and 2013 respectively.
“Improving economic conditions, however, particularly the continuation of improving real wages – due to extremely low inflation – should see gross lending rising at a steady rate up to 2019.
“Growth in the mortgage market will be supported by rising house prices necessitating larger value loans and regional variations in house prices will continue to influence the distribution of mortgage lending.”1