The latest report from the Intermediary Mortgage Lenders Association (IMLA), The new ‘normal’ – prospects for 2025 and 2026, offers an optimistic outlook for the residential and buy-to-let mortgage markets, forecasting growth underpinned by stabilising interest rates, increased remortgaging demand, and the enduring role of intermediaries.
The report predicts a continued rise in the share of mortgage business conducted through intermediaries, climbing from 87% in 2024 to 89% in 2025, and reaching an unprecedented 91% in 2026.
Gross mortgage lending is expected to grow significantly, increasing from £237.5bn in 2024 to £275bn in 2025 (up 16%) and £295bn in 2026 (up 11%). Lending for house purchases is forecast to hit £177bn in 2025 and £190bn in 2026, while remortgaging will rise to £88bn and £94bn respectively.
These increases are attributed to falling interest rates and easing affordability pressures. IMLA anticipates that interest rates, while unlikely to return to the ultra-low levels seen pre-2022, will settle between 3% and 4%. As a result, the average borrower’s mortgage interest costs—currently 15.5% of income—are expected to decline slightly, opening new remortgaging opportunities for the 1.8m fixed-rate borrowers set to refinance in 2025.
The buy-to-let market is also forecast to grow, with lending rising from £38bn in 2025 to £42bn in 2026 (an increase of 11%). Falling interest rates and rising rents, driven by the ongoing supply and demand imbalance, are expected to support landlord affordability. However, the rise in stamp duty for additional properties and concerns over the Renters’ Reform Bill may deter some new purchases and prompt existing landlords to exit the market, further tightening rental supply.
Despite earlier concerns, arrears exceeding 2.5% of loan balances began to fall in Q3 2024. IMLA projects a continued decline, from 0.98% at the end of 2024 to 0.94% in 2025, and 0.85% in 2026, reflecting lenders’ robust underwriting and flexibility in assisting borrowers facing difficulties.
Kate Davies, executive director of IMLA, said: “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.
“Buy-to-let 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.”
