Mortgage lending will grow by 11% next year to reach £260bn driven in part by a large increase in remortgaging, UK Finance forecasts.
The banking trade body expects gross lending for 2024 to be £235bn when the final numbers are counted, marking an increase of 4% on last year’s total.
Within the full-year estimates for this year, lending for purchase has risen by 11% to £135bn, while borrowers remortgaging from one lender to another has slumped back by 10% to £59bn.
But UK Finance expects remortgage activity to surge by 30% in 2025 to reach £76bn, while at the same time it predicts lending for purchase will climb by 10% to £76bn.
Internal product transfers do not form part of the gross lending total but continue to dwarf remortgage activity, at an estimated total of £224bn for this year, although this is 7% below last year’s number.
UK Finance predicts product transfers will grow by 13% next year to £254bn.
Lending for new buy-to-let purchases increased by 10% this year to £10bn, but is expected to drop back by 7% next year to £9bn.
Mortgage arrears fell 3% this year to 104,200 from a year ago, with the proportion set to rise 5% next year though the overall total will fall to 99,000 as total home loans rise in 2025.
UK Finance head of analytics James Tatch says: “The mortgage market showed greater than previously expected resilience in 2024 as cost and rate pressures began to recede.
“Affordability constraints did impact external remortgage activity, but strong competition to retain customers meant those coming off fixed rates could find a new internal product transfer deal without needing a new affordability test.
Tatch adds: “In 2025, we are forecasting continued steady growth in both house purchase and remortgage lending as affordability improves further. We are however forecasting a slight fall in buy-to-let lending in 2025.
“The prudent underwriting standards in place for the past decade have helped most customers who might have fallen into difficultly. Arrears look to have peaked early in 2024 before falling back, and we expect them to fall again in 2025.”