The buy to let market improved in 2024 over last year, says the lenders trade body UK Finance.
It says the cost and interest rate pressures which forced a sharp contraction in the BTL market through 2023, have eased.
“House purchase lending to landlords grew by thirteen per cent to £10 billion. As with the residential sector, this growth was in response to the lowering of new mortgage rates through the year” says the body.
But it warns that for 2025, however, conditions look more challenging.
“The introduction of an additional two per cent Stamp Duty surcharge announced in the Autumn Budget will act as a further deterrent to a market which already faces heightened regulatory and taxation challenges.
“Whilst the sector continues to adapt to meet these challenges, we do expect BTL purchase activity to contract modestly (seven per cent) to £9 billion in 2025.”
More generally, across all mortgage lending, UK Finance says with rate and cost pressures continuing to ease, the outlook for 2025 is for a gradual improvement in mortgage affordability, feeding into market growth. As interest rates tick down, it expects arrears to continue to fall.
James Tatch, Head of Analytics at UK Finance, 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.
“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.”
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Predicted Year on year change, 2025 compared to 2024
Gross Lending – £260 billion +11 per cent
Lending for house purchase – £148 billion +10 per cent
External remortgaging – £76 billion + 30 per cent
New buy to let purchase lending – £9 billion, down 7 per cent
Internal product transfer – £254 billion +13 per cent
Arrears – 99,000, down 5 per cent
This article is taken from Landlord Today