Hopes first-time buyers keep 2018 mortgage market afloat

UK Finance has upped its forecast for the mortgage market during 2018 as the country’s economy continues to perform strongly despite uncertainty over

UK Finance has upped its forecast for the mortgage market during 2018 as the country’s economy continues to perform strongly despite uncertainty over Brexit.

The trade body said it expects gross lending to total £260bn next year, a slight increase on its previous forecast – made in December 2016 – of £252bn.

UK Finance said the market would be buoyed by a greater number of first-time buyers taking advantage of competitive mortgage rates, along with a continued trend for high levels of remortgaging.

Although uncertainty over Brexit continues to weigh on the economy, government schemes and good credit availability have sustained demand from homebuyers as employment growth remains strong.

Mohammad Jamei, senior economist at UK Finance, said: “We are slightly more optimistic about the next two years than we were a year ago. We expect more first-time buyers over the next two years, helped in part by competitive mortgage rates and government housing schemes. 

“Home mover numbers have recovered a little in 2017, but look set to remain flat over 2018 and 2019, as they have benefitted less from government support and have been largely left to fend for themselves. 

“The number of home owners re-mortgaging with a new lender has grown strongly in 2017, and our expectation is for this to continue over the medium term.”

UK Finance said the housing market is relatively insulated from external shocks, and the current slowdown in London is mainly limited to prime central areas.

But the forecast for the buy-to-let forecast is less positive, with activity back in 2012 territory and looking unlikely to recover in 2018 or 2019.

Last month the government scrapped stamp duty for the majority of first-time buyers to help more young people get on the housing ladder.

UK Finance said this would help first-time buyers, despite claims from the Office for Budgetary Responsibility that it would merely serve to push up house prices.

First-time buyers will also be helped by the continued support from the Help to Buy: Equity Loan scheme, although a lack of support for home movers will hold back supply.

Home mover activity in 2018 and 2019 is expected to match the levels seen over the past three years, UK Finance said.

The trade body has cut its forecast for arrears and repossessions during 2018, although they are still expected to increase from their current levels.

Mike Pendergast, adviser at Cheshire-based Zen Financial Services, said: “We have been reasonably busy in the last few months, and hopefully it will continue into next year.

“It depends on interest rate changes, really. If the base rate goes up higher than expected, that will slow things down. But the changes in stamp duty will be welcomed by first-time buyers.”

simon.allin@ft.com

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