Confidence has returned to the mortgage market, with sentiment improving steadily month by month in the last quarter of 2023, according to the latest Mortgage Market Tracker report from the Intermediary Mortgage Lenders Association (IMLA).

In total, 76% of intermediaries said they were confident about the outlook for the market in September, falling to 69% in October but then rising to 83% by December. Of the 83%, 21% were ‘very confident’. The overall ‘confident’ figure for the quarter was 74%. That is a marked improvement on Q4 2022, when 65% said they were confident about the future for the mortgage industry.

Confidence levels in intermediaries’ own businesses were even higher, with 92% of intermediaries describing themselves as confident in the outlook for their own firms in Q4 2023.

The average number of mortgage cases placed by intermediaries on an annual basis increased to 95 per year, compared to 92 in Q3. Mortgage brokers placed an average of 103 cases, while IFAs reported an average of 62.

Residential lending continued to accounted for roughly two-thirds of intermediaries’ business, buy-to-let around a quarter and specialist about one in 14 cases. The proportion of buy-to-let cases placed remained roughly the same as the previous three quarters of 2023.

Having increased to 25 in Q2, the average number of Decisions in Principle (DIPs) that intermediaries processed fell in Q4, with the lowest average of just 20 DIPs recorded in December and the Christmas period. The biggest falls were in DIPS for first-time buyer-focused brokers* and specialist-placing advisers**.

In Q4 2023, conversions from DIP to completion remained stable at 38%, close to mid-2022 levels. The overall conversion rate was broadly similar across all market segments except first-time buyer-focused brokers*, who saw a 6% fall. Brokers in the Midlands also saw a 5% fall in DIP to completion conversions.

The conversion rate from full application to completion fell from 64% in Q3 to 61% in Q4, but was still up 3% year-on-year.

Kate Davies, executive director of IMLA, commented: “It is great news that confidence is returning to the mortgage industry after a challenging year, and that intermediaries are feeling positive not just about the future of their own businesses, but the wider market in which they operate. We will watch closely to see whether sentiment continues to improve if inflation carries on its downward trend.

“It is interesting to note that the level of buy-to-let business remained broadly consistent throughout 2023, despite negative headlines. The slight drop in first-time buyer numbers was perhaps to be expected given the ongoing cost of living crisis and the increased challenge of saving for a deposit, on top of wider affordability constraints.”

“These latest results are a testament to the resilience of intermediaries who have been operating in difficult conditions to secure the right solutions for their customers.

“Competition in the market is now lively, and lenders are confident that mortgage advisers will continue to work hard to find the most suitable mortgages for their clients from a vast array of products on offer. As a result, IMLA predicts that intermediaries will account for 89% of all mortgage business written this year.”