IMLA expects lending to rise further still in 2021 to reach £275bn with growth largely driven by lending to house purchasers.
The trade body also expects intermediaries to grow their market share to 77 per cent of all mortgage transactions this year.
While remortgage business was the main driver of growth in the market until 2018, it is expected to remain flat over the next two years at £100bn as more borrowers turn to product transfers and higher volumes of five-year fixed rate mortgages reduce the amount of market churn.
Product transfer volumes grew by 13.3 per cent between Q1 2018 and Q3 2019. The report forecasts that this area of the market will continue to grow over the next two years. IMLA expects a further four per cent increase in product transfer business in 2020 to £172bn and a two per cent increase in 2021 to £176bn.
Activity in the market, said IMLA, would be underpinned by an increase in wages and low mortgage interest rates. The low rate environment has already provided borrowers with a £32bn windfall in reduced interest payments compared to a decade ago, according to the report.
Political certainty after the general election is also expected to encourage borrowers back to the market, however, the modest growth predicted partly relies on Britain’s ability to negotiate a trade deal with the EU, said IMLA.
IMLA’s predictions, however, run contrary to UK Finance’s forecast released in December that gross mortgage lending would drop to £254bn this year.
Positive two years
Kate Davies (pictured), executive director of the Intermediary Mortgage Lenders Association, said: “The next two years certainly look positive for the mortgage market. In 2019 the sector remained resilient in the face of ongoing political uncertainty, but our report shows that a boost in consumer confidence is likely to support modest growth over the next two years.
“Intermediaries are driving a large part of that growth as borrowers continue to seek out the expertise of advisers to help them find a mortgage.”
IMLA’s report also predicts that the buy-to-let market will continue to fall to £40bn in 2020 and £39bn in 2021 as tax relief for landlords is fully removed in April this year.
Davies added: “Although we expect modest growth for the mortgage market over the next two years, Britain’s housing market is still far from perfect. The buy-to-let sector continues to be under pressure from a spate of tax and regulatory measures enacted over the last five years and IMLA continues to call for a moratorium on any further changes to the private rented sector.”