After falling off a cliff in 2023 mortgage lending will fall again next year – before picking up the year after, the Intermediary Mortgage Lenders Association has predicted.

Lending is on track to fall by around 28% to £225.5bn in 2023.

Next year it is expected to worsen again, to £205bn, before recovering to £210bn in 2025.

Kate Davies, executive director of IMLA, said: “After the shocks that have buffeted the global economy in recent years – lockdowns in 2020 and 2021 and the Russian invasion of Ukraine in 2022 – 2023 saw a welcome respite and a partial return to normality as the disruption from supply chain and war-related dislocation eased considerably.

“However, our ‘new normal’ is a higher interest rate environment than the one to which we became perhaps too accustomed post-financial crisis. The increase in Base Rate from 0.1% to 5.25% in just over two years has inevitably subdued the mortgage sector to a degree.

“Yet the housing market has proved remarkably resilient and mortgage affordability is comfortable for the typical borrower – although longer mortgage terms are no doubt a factor.”

In 2023 lending for house purchase fell by 30% to £135 billion and remortgaging by 24% to £82 billion.

While home-mover mortgage interest payments consumed 12.7% of gross income on average in the year to September 2023, this figure was still below the long-term average of 13.8%.

n contrast, for first-time buyers the 2023 figure of 16.0% was above the long run average of 14.8%. This difference reflects the increased difficulties first-time buyers have faced as house price inflation has outstripped income growth.