Gross mortgage lending is forecast to rise by 11% as affordability improves, and steady growth is predicted for 2025.
UK Finance has recently released its latest housing and mortgage market forecasts, which project continued growth throughout 2025. The forecasts suggest that easing affordability pressures, alongside falling interest rates, will help drive growth across most mortgage sectors.
The predictions suggest that gross mortgage lending will reach £260 billion next year – an 11% increase from 2024. Breaking this down, lending for house purchases is predicted to rise by 10% to £148 billion, and external remortgaging is forecast to grow by 30%, reaching £76 billion.
‘In 2025, we are forecasting continued steady growth in both house purchase and remortgage lending as affordability improves further,’ says James Tatch, head of analytics at UK Finance.
Meanwhile, mortgage lending for new buy-to-let purchases is expected to fall by 7%, to £9 billion.
Strong surge in first quarter
The latest analysis from Nationwide also predicts the housing market will strengthen during 2025 – and suggests there may be a surge of activity in the first quarter due to the changes in stamp duty, which come into effect in April 2025.
‘Upcoming changes to stamp duty are likely to generate volatility, as buyers bring forward their purchases to avoid the additional tax,’ says Robert Gardner, Nationwide’s chief economist. ‘This will lead to a jump in transactions in the first three months of 2025, especially in March, and a corresponding period of weakness in the following three to six months, as occurred in the wake of previous stamp duty changes.
This will make it more difficult to discern the underlying strength of the market. But, providing the economy continues to recover steadily, as we expect, the underlying pace of housing market activity is likely to continue to strengthen gradually, as affordability constraints ease through a combination of modestly lower interest rates and earnings outpacing house price growth, where the latter is likely to remain broadly in the 2% to 4% range in 2025.’
If you plan to buy a property or move home in 2025, we’re here to help.