The organization representing mortgage lenders has issued an optimistic outlook for 2025, citing lower interest rates and easing cost-of-living pressures as key factors that will enhance mortgage affordability and drive increased buying activity.

UK Finance projects home purchase lending to grow by 10% to £148 billion, while remortgaging activity is expected to surge by 30% to £76 billion. In contrast, buy-to-let mortgage lending is predicted to decline by 7% to £9 billion, reflecting ongoing challenges in that segment.

The forecast follows a modest 2024, where mortgage activity remained below historical levels. However, UK Finance believes improving economic confidence will spur significant growth in lending next year.

The buy-to-let market remains a concern, with the organization noting it will face further challenges, largely due to the additional Stamp Duty introduced in the recent Autumn Budget.

“In 2025, we are forecasting continued steady growth in both house purchase and remortgage lending as affordability improves further,” said James Tatch, Head of Analytics at UK Finance.