Portrait Of Excited Young Couple Standing Outside New Home Holding Keys Together

Five year forecast: Which specialist lending areas are set to grow the most?.

13 Dec 2024 | 3 min

It’d be great to know the future, wouldn’t it? Especially if it was next week’s lottery numbers.

And while we can’t help you hit the jackpot, we can give you a heads up on what may be on the horizon for the residential property market and specialist lending sectors.

Rob a professional man in a suit and tie.

As part of our latest residential property market report, we asked former Bank of England economist and industry leading economic analyst, Rob Thomas for his expert forecast and predictions for the next five years.

Here’s what Rob had to say:

“Non-standard mortgage applications cover lending to those with complex incomes, the self-employed, those with impaired credit, and many other homeowners, or potential homeowners. On top of that, there’s a huge demand for large loans, second charge loans, bridging loans, shared ownership and Right to Buy properties, plus many other specialisms. Demand for specialist lending has never been higher.”

What will happen with interest rates and the economy in the next few years?

“Although domestic inflationary pressures are proving harder to control than expected, which might delay further interest rate cuts, we do expect the Bank Rate to be cut again in 2025 and more sharply in 2026. Lower interest rates and rising real wages should ensure the recovery picks up momentum with the 2027-29 period seeing growth exceeding 2% per annum. This is despite the full effect of higher rates not being felt yet, as many households are still on low fixed rate products taken out before rates started to rise.”

How will the housing market perform between now and 2029?

“The housing market will be a key beneficiary of rising real wages and falling interest rates. House prices could rise by 20% between 2023 and 2029 while property transactions could reach 1.3 million by 2029 against 1.019 million in 2023. These conditions are bound to stimulate growth in the mortgage market.
We expect total lending to rise from £224 billion in 2023 to £315 billion by 2029 - a 41% gain.”

Partly constructed new build homes with scaffolding

The appetite for home buying may be growing, but will there be enough housing stock to meet the already competitive demand?

Check out our recent blog where we look at the government’s ambitious five-year house building plans and ask if their 1.5 million new builds target is achievable.

Find out the answer

Which areas of specialist lending are set to grow before the end of the decade?

“Our forecast for specialist lending sees the total, for segments on which we have data, increasing from £32 billion to £54 billion over the period between 2023 and 2029 - a 70% increase. We expect lending for shared ownership to be the fastest growing segment over this period, increasing by 126% as the government and the lending industry encourage this as a path for those who find full ownership to be out of reach. It will be followed closely by lending to the retired as the older population with mortgages continues to rise sharply. Lending to other borrowers who are not employed is also expected to show a healthy gain. The only category we see declining is Right to Buy (down 36%) as a result mainly of reduced discounts for purchasers.

We forecast that by 2029, over 20% of all regulated mortgage lending will fall within one or more specialist category.”

	2023 - £m	2029 - £m	Total Growth
Impaired credit	950	1,623	70.9%
Self-employed	20,887	34,786	66.5%
Retired	615	1,391	126.2%
Other not employed	1,834	3,537	92.8%
Shared ownership	2,305	5,218	126.4%
Right to Buy	636	406	-36.2%
Self-build	57	116	103.4%

Specialist lending categories 2023 – 2029 forecast comparison, Rob Thomas

What challenges will consumers face?

“Although we expect specialist lending to play an increasing role in the coming years, we believe that there are still many households who may believe that they cannot achieve their housing ambitions because they do not fit the criteria of high street lenders.

A higher profile and awareness for specialist lending could help to reach these households, allowing more of them to enjoy the wide range of benefits that homeownership brings.”

Are people planning to buy or move in the next 12 months? What is the main reason individuals have had mortgages rejected? How much is spent on the average home improvement project?

We asked the nation these questions and more to see what they really thought about the property market and borrowing. Find out the results in our latest residential property market report.

Read our full report

Rob’s expert economic analysis certainly points to a brighter future for the housing market, even a residential revival. But, as we all know from recent years (yes, we’re looking at you, COVID-19), it can be really difficult to accurately predict exactly what will happen.

At Together, we’ve been opening doors for our customers for over 50 years, in good times and bad times. Our flexible product range and common-sense approach to property types, income, credit and affordability means that we can help more people get the outcome they want and achieve their property ambitions.

What are your property plans for the next five years? Ready to find out how we can help?

Get in touch