As the market closes on a somewhat turbulent year, there is cautious optimism within the industry for 2025.

The Intermediary Mortgage Lenders Association (IMLA) has predicted that 2025 will see healthy lending growth, greater intermediary business and more remortgaging.

In its latest report the association expects the share of mortgage business conducted through intermediaries to continue its upwards trajectory, rising from 87% in 2024 to 89% in 2025 and 91% in 2026.

Other key predictions include an increase in gross mortgage lending from £237.5bn in 2024 to £275bn in 2025, growing further to £295bn in 2026, with house purchase lending of £177bn and £190bn respectively, and remortgaging of £88bn then £94bn.

The increase in lending will be underpinned by lower interest rates and a rise in demand for remortgaging as affordability pressures ease.

In terms of affordability, the average new borrower currently spends around 15.5% of their income on mortgage interest.

IMLA suggests that figure is set to fall slightly as rates come down, modestly improving affordability and opening up more remortgage opportunities for the 1.8m borrowers coming to the end of a fixed-rate deal in 2025.

It also expects that 70% of the growth in gross mortgage lending to come from advances for house purchases (£177bn), while remortgage activity will rebound by 13% to £88bn.

The association also predicts a rise of 14% in buy-to-let (BTL) lending to £38bn and £42bn in 2026 (up 11%).

Meanwhile, contrary to predictions made this time last year, arrears of more than 2.5% of loan balances started falling in Q3 2024.

It expects them to carry on this downward trajectory from 0.98% of accounts at the end of 2024 to 0.94% by the end of 2025, with a further fall to 0.85% in 2026.

IMLA executive director Kate Davies says: “After a period of economic volatility, high inflation, rising borrowing costs and great uncertainty, the environment feels rather more settled, and the housing and mortgage markets are coping surprisingly well with the ‘new normal’, after the ultra-low interest rates of the last decade.”

“2025 looks to be a year of greater stability and modest but welcome growth. Brokers will no doubt welcome a shift in emphasis from Product Transfers to remortgaging, and the opportunity that offers to fully assess their clients’ needs and scour the market for the most suitable solutions.”

“BTL landlords continue to face the challenge of increased regulation and higher taxes. and will be looking to run their property businesses as efficiently as possible. Many will rely on professional guidance in this endeavour.”

“With decreasing interest rates and almost a third of remortgagors coming off fixed deals faced with lower-cost mortgages in 2025, arrears will continue to fall from their very low base. This is good news for borrowers and lenders alike, and reflects both the effectiveness of lenders’ initial underwriting procedures and also their flexibility in helping borrowers who get into difficulty.”

“In a growing and increasingly competitive market, in 2025 mortgage advisers will play an even greater role in helping borrowers find the optimal solutions for their individual needs, with the share of business going through intermediaries set to break the 90% barrier in 2026 for the first time in the history of the market.”

Meanwhile, Coventry for intermediaries head of product Ian Biggs says he is “cautiously optimistic” about 2025.

Biggs says: “With the base rate expected to fall, we expect mortgage rates to follow suit, creating a more favourable environment for borrowers. The scale of maturities next year will also play a role in driving activity, which bodes well for the market overall.”

“While volatility—such as fluctuating swap rates—has been a challenge this year, the recent easing of rates provides a sense of stability. The market isn’t expected to contract compared to this year—in fact, there’s room for growth.”

Similar to IMLA, Biggs expects there to be continued activity in the BTL sector, particularly in refinancing existing portfolios.

However, he says the real growth area will likely be in limited company BTL.

He states: “Faced with increasing tax pressures, many landlords are exploring Limited Company structures as a more tax-efficient alternative to traditional ownership.”

“This strategic shift allows landlords to mitigate rising costs while optimising their portfolios. It also opens up new avenues for expansion, enabling them to remain competitive and adapt to a changing market landscape.”

Also cautious about next year is finova sales director John Tilzey. He states: “While expectations of a significant rebound in volumes have tempered over the past few months, it’s likely that transaction levels will still linger below the long-term average, with Savill’s recently predicting UK values to grow by 4% in 2025.”

“Equally, the recent changes in the Budget have led to revised expectations around interest rate cuts. Inflationary pressures, especially from National Insurance increases and rising gilt rates, will likely slow the pace of monetary easing.”

“Reducing the Stamp Duty Land Tax (SDLT) free Threshold for first-time buyers from £425k to £300k could result in an additional tax burden of £6,250, which may dampen demand from this key group – and increases in SDLT on second homes may only further suppress activity.”

“But it’s not all doom and gloom. We expect further rate cuts, limited house price growth, and above-inflation wage increases—particularly in the public sector—which should improve affordability for many buyers.”

“While the budget wasn’t perfect, it could have been worse, and with the worst of the tax increases hopefully behind us, confidence levels should rise in 2025. We could also see a strong push from first-time buyers to complete purchases by the April 1st 2025 deadline, resulting in a positive start to the new year.”

Elsewhere, Saffron for Intermediaries head of business development Tony Hall says that next year will be a “pivotal” one for the industry.

Hall explains: “With UK Finance forecasting £216bn in new business origination and £195bn in product transfers, creating an almost half-a-trillion-pound market. Around 1.6 million borrowers came off fixed-term mortgage products in 2024, and it’s likely to be a similar story next year.”

“This will highlight the critical role of brokers, who arrange 90% of mortgages, underscoring their value in navigating increasingly complex market conditions.”

While there is plenty of optimism in the air, Hall suggests there will “inevitably be bumps along the way”.

However, he comments: “These hurdles present opportunities for brokers and lenders to showcase their expertise and adaptability. The growing complexity in borrower circumstances gives lenders like ourselves a chance to shine, offering tailored solutions to meet diverse needs.”

“The increased reliance on brokers underscores the critical role intermediaries play in helping customers achieve the best possible outcomes for their needs.”