In line with a broader economic recovery, increased housing construction and demand-side incentives for the purchase of newly built properties will signal a growing appetite for mortgage lending over the next four years, according to a report by Timetric.
Gross mortgage lending is expected to increase at a CAGR of 7.06% over the forecast period. The fastest growth is set to be in 2017, with a forecasted rate of 11.7%, which is largely due to the Office for Budget Responsibility predicting the year will see the largest growth in UK house prices over the period. Timetric expect gross lending to total GBP218.6 billion in 2015, before rising to GBP241.6 billion in 2016 and reaching GBP286.8 billion in 2019.
According to Ben Carey-Evans, Analyst at Timetric: “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.”
On the other hand, mortgage outstanding balances are expected to grow at a slower pace, registering a CAGR of 1.42%. Repayments are likely to increase as stronger economic growth prompts a rise in the official Bank of England policy rate and a subsequent increase in banks’ mortgage interest rates. Balances outstanding are forecast to reach GBP1.33 trillion by the end of 2015 to reach GBP1.39 trillion by 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,” Carey-Evans concludes.
All information is based on the recent Timetric report: ‘Mortgage Lending in the UK – Key Trends and Opportunities to 2019’.
Timetric is a leading provider of online data, analysis and advisory services on key financial and industry sectors. It provides integrated information services covering risk assessments, forecasts, industry analysis, market intelligence, news and commentary. For more information and updates, please visit www.timetric.com