UK Mortgage Market 2016: Forecasts and Future Opportunities

Pages: 36 Published: December 31, 2016 Report Code: VF00104IA

2016 has been a good year for the market, with gross lending expected to be 12% higher than in 2015. However, market conditions over the next few years are predicted to dampen prospects for future growth. On the supply side, legislative changes in the buy-to-let sector, namely higher rates of stamp duty and more stringent underwriting requirements, will act as a drag on future growth in what has been the standout sector in the years since the financial crisis. On the demand side, economic uncertainty caused by the Brexit vote will reduce the willingness of consumers to take on more debt.

This report offers five-year gross lending forecasts for residential and niche mortgages, along with a detailed examination of the various demand- and supply-side factors that will determine the market outlook.

It offers insight into:
– The key macroeconomic, regulatory, and other factors that will drive the demand for and supply of mortgages over the next five years.
– The outlook for niche sectors, including buy-to-let, equity release, shared ownership, shared equity, and self-build.


– Buy-to-let lending, the outstanding success story of recent years, will suffer a reversal of fortune due to adverse changes in stamp duty, tax relief, and underwriting criteria. Following a rush by investors to beat the April 2016 increases in stamp duty, new lending in the latter part of the year has been lower than in 2015, and the market will flatline in subsequent years.

– Lending on shared ownership properties will see huge percentage increases over the forecast period, largely off the back of the government’s new Affordable Homes Programme. During 2016–21, an estimated 135,000 shared ownership homes will be built under this scheme, thus fueling a boom in associated mortgage lending.

– Equity release continues to enjoy much success, with lending showing significant year-on-year growth. Prospects for further growth are healthy, with several years’ worth of property price rises leaving borrowers with plenty of capital value to unlock, while the cost of equity release products is falling.

Reasons to Buy

– Develop more targeted strategies through the analysis of key mortgage market developments.

– Inform your future plans with our five-year forecast of gross advances for niche product lines.

– Analyze trends with details of historic gross advances across a range of specialist mortgage sectors and product types.

Key Players

Mortgage Advice Bureau
Al Rayan Bank
Bluestone Mortgages
Magellan Homeloans.

Table of Contents


1.1. The state of the UK mortgage market

1.2. Key findings

1.3. Critical success factors


2.1. Gross lending will rise to £287.2bn by 2020

2.2. Supply and demand factors will combine to deliver sustained growth

2.3. Supply side factors will ensure stable growth in mortgage availability

2.3.1. Tighter underwriting standards in the buy-to-let sector

2.3.2. Help to Buy schemes continue to generate business among first-time buyers

2.3.3. The MCD will have a limited effect on the market

2.3.4. Regulatory intervention has reduced the availability of high LTI deals

2.3.5. Brexit's potential impact on the mortgage market

2.4. Macroeconomic factors point towards a modest increase in demand

2.4.1. An uncertain economic outlook will dampen demand beyond 2016

2.4.2. Consumer confidence dropped sharply, but quickly recovered after July 2016

2.4.3. Ongoing low interest rates continue to depress remortgaging activity

2.4.4. Low mortgage rates will boost consumer demand for mortgages

2.5. There is plenty of scope for innovation in the mortgage market

2.5.1. Habito brings robo-advice to the UK mortgage market

2.5.2. Trussle offers a hassle-free way to get a mortgage


3.1. Buy-to-let lending will consolidate and growth will fall to a more sustainable level

3.2. Shared equity activity will grow strongly over the next few years

3.3. Shared ownership will be massively boosted by the new Affordable Homes Programme

3.4. Right to Buy mortgage lending will grow convincingly over the forecast period

3.5. Equity release is well placed and prospects for the market are improving

3.6. Self-build lending is expected to grow slowly but steadily over the next few years.

3.7. Secured lending will see stable growth over the next few years

3.8. Professional and graduate mortgage lending is stagnating

3.9. Islamic home finance remains on course for further strong growth


4.1. Offset mortgage lending will flatline over the next few years

4.2. Growth in large-value mortgage lending will be impacted by stamp duty changes

4.3. Near-prime lending has outperformed the rest of the market in 2016 and will continue to grow


5.1. Abbreviations and acronyms

5.2. Definitions

5.2.1. BoE base rate

5.2.2. Gross advances

5.2.3. Remortgaging

5.3. Methodology

5.3.1. Future Sentiment Index

5.3.2. Present Sentiment Index

5.4. Bibliography

5.5. Further reading

List of Tables

Table 1: New stamp duty rates applicable to the purchase of new properties from April 2016

List of Figures

Figure 1: Mortgage lending is expected to grow at an average of 5-6% each year during 2016-20

Figure 2: 79% of purchases under Help to Buy were by first-time buyers

Figure 3: First-time buyer lending rose 15% in Q2 2016 compared to the same period of 2015

Figure 4: Lending caps have led to a reduction in high LTI mortgage availability

Figure 5: External factors point towards a slowdown in growth in mortgage lending

Figure 6: Key macroeconomic indicators predict a steep rise in the mortgage market

Figure 7: Consumer confidence plummeted towards the end of 2015

Figure 8: Advances for remortgages continue to lag behind those for house purchases

Figure 9: Habito's mortgage calculator processes changes more quickly than human advisors

Figure 10: Trussle helps first-time buyers and existing homeowners find the best mortgage deal

Figure 11: The rapid growth in buy-to-let lending will come to a halt

Figure 12: Shared equity lending will be supported by the Help to Buy Equity Loan scheme

Figure 13: Activity under the new Affordable Homes Programme will be heavily weighted to the back end

Figure 14: The extension of Right to Buy to housing association homes will boost activity

Figure 15: Equity release lending will experience double digit growth during 2016-20

Figure 16: Self-build lending will see steady growth as a result of government action

Figure 17: Secured lending will remain strong despite the new MCD regulations

Figure 18: Provision of graduate and professional mortgages will remain low

Figure 19: Islamic home financing will enjoy strong growth over the forecast period

Figure 20: Offset lending will not make any headway

Figure 21: The slowdown in the prime property market will affect large-value mortgages

Figure 22: Near-prime lending will benefit from a greatly expanded supply of finance


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