UK Mortgage Market 2017: Forecasts and Future Opportunities

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While the market has recovered well since the financial crisis, often growing by a double-digit percentage year-on-year, rising economic uncertainties will dampen the prospects for future growth over the coming years. During 2017-21, gross advances are expected to record a CAGR of 5.7%, reaching £327.0bn by the end of the forecast period.

On the supply side, an increased supply of new homes, stamp duty relief for first-time buyers, and tighter controls on buy-to-let lenders will improve matters for first-time buyers by reducing investor demand for properties. Legislative changes in the buy-to-let sector such as higher stamp duty and stricter underwriting standards will act as a drag on future growth, in what has been the standout sector in the years since the financial crisis.

Political uncertainty arising from the Brexit negotiations has dampened the economy’s prospects. At the same time, real wages are shrinking as annual pay increases fail to keep pace with rising inflation. Combined with the rapid growth in consumer credit and ensuing high levels of household debt, this will limit the capacity of consumers to take on significantly higher levels of mortgage debt.

This report offers five-year gross lending forecasts for residential and niche mortgages up to 2021, 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.


– The impressive growth in buy-to-let lending as seen over the last few years has come to a sudden halt, and is unlikely to resume in the near future.

– 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.

– 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 2016-21. An estimated 135,000 shared ownership homes will be built under this scheme, thus fueling a boom in associated mortgage lending.

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.

– Benchmark yourself against competitors and ensure you remain competitive as new innovations begin to enter the market.

– Be prepared for how regulation will impact the mortgage market over the next few years.

Stafford Railway Building Society and Tipton & Coseley Building Society
Al Rayan Bank
Secure Trust Bank
The Mortgage Lender
Foundation Home Loans
Vida Homeloans and Masthaven
Pepper Homeloans

Table of Contents

Table of Contents


1.1. Market summary 1

1.2. Key findings 1

1.3. Critical success factors 1


2.1. Gross mortgage lending is forecast to reach £327bn by 2021 6

2.2. Supply and demand factors will combine to ensure moderate future growth 7

2.3. Supply-side factors will increase the pool of funds available for lending 8

2.3.1. Regulatory changes have dampened the appeal of the buy-to-let sector 8

2.3.2. First-time buyers will benefit from the stamp duty land tax relief 9

2.3.3. The Help to Buy extension delivered a big boost to first-time buyers 10

2.3.4. The Shared Ownership and Affordable Homes Programme marks a decisive shift towards support for home ownership 12

2.3.5. Support for mortgages under the Funding for Lending Scheme will end in January 2018 13

2.4. Factors will exert both upside and downside pressures on demand 13

2.4.1. The government is taking a new approach to stimulating housing supply 14

2.4.2. First-time buyers get a boost from the Lifetime ISA 15

2.4.3. The UK economy will slow, modestly impacting demand for mortgages 16

2.4.4. Low consumer confidence will impact demand for mortgages 17

2.4.5. House-price growth is well below the pace of recent years 18

2.4.6. Rate rises will boost remortgaging activity in the short term 19

2.5. Brexit’s potential impact on the mortgage market 20

2.5.1. Demand for home finance has been impacted 20

2.6. Industry stakeholders are embracing innovation to thrive in the mortgage market 21

2.6.1. MortgageGym aims to speed up loan applications 22

2.6.2. NatWest is the first provider to offer online paperless mortgages 23


3.1. Government intervention will rein back buy-to-let lending 25

3.2. Shared equity activity will remain stable, driven by the Help to Buy scheme 26

3.3. Shared ownership growth will be supported by the Affordable Homes Programme 27

3.4. Right to Buy will grow moderately over the next few years 29

3.5. Equity release will see double-digit growth up to 2021 30

3.6. Regulatory changes will boost self-build lending 31

3.7. The secured lending market will accelerate after a disappointing end to 2016 32

3.8. Professional and graduate mortgages will continue to flatline 33

3.9. Islamic home finance will enjoy strong growth 34


4.1. Offset mortgage lending will grow in line with the overall market 36

4.2. Stamp duty changes are depressing large-value mortgage lending 37

4.3. Near-prime lending is expected to remain strong 38


5.1. Abbreviations and acronyms 39

5.2. Definitions 39

5.2.1. BoE base rate 39

5.2.2. Gross advances 39

5.2.3. Remortgaging 39

5.3. Methodology 40

5.3.1. Future Sentiment Index 40

5.4. Bibliography 40

5.5. Further reading 41


List of Tables

Table 1: Stamp duty changes for first-time buyers 10

Table 2: Mortgage completions from October 2013 to December 2016, by type of borrower 11

Table 3: Mortgage completions from October 2013 to December 2016, by property value 11


List of Figures

Figure 1: Gross mortgage lending reached £245bn in 2016 7

Figure 2: The buy-to-let market has been more volatile given the recent tax changes 9

Figure 3: First-time buyer lending rose by 10% in Q1 2017 compared to the same period of 2016 12

Figure 4: The pace of new-build development is slow 15

Figure 5: Key macroeconomic indicators predict a slowdown in growth in the mortgage market 17

Figure 6: Consumer confidence recovered in early 2017, but slipped in October 18

Figure 7: UK house price growth is well below its recent average 19

Figure 8: Transactions fell in the immediate aftermath of the referendum and Brexit has potential for further impact 21

Figure 9: MortgageGym provides detailed insight into the range of mortgages available within 60 seconds 23

Figure 10: NatWest’s digital mortgage offers can be made within 24 hours 24

Figure 11: Buy-to-let gross advances will record slow growth over the forecast period 26

Figure 12: Shared equity lending will grow at an average of 9% over the forecast period 27

Figure 13: Shared ownership has been boosted by the Affordable Homes Programme 28

Figure 14: Right to Buy lending will rise at a stable pace over the forecast period 29

Figure 15: Equity release lending will grow by 27% on average during 2017-21 30

Figure 16: The self-build market is set to grow between 5-7% over the forecast period 32

Figure 17: Secured lending will remain strong despite the new Mortgage Credit Directive 33

Figure 18: The lack of providers in the professional and graduate mortgage market will hold back growth 34

Figure 19: Rising awareness of Islamic finance will lead to growth in mortgage lending 35

Figure 20: Offset lending will hold its own in relation to the overall market 36

Figure 21: Large-value mortgage demand will come from wealthy foreign buyers 37

Figure 22: Near-prime lending will see impressive growth rates over the next few years 38

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