Atom bank forecasts for 2025

19 December 2024

Tom Renwick, Head of Business Banking, Atom bank:

“2024 has undeniably been a challenging year, but there are reasons for optimism about the state of 2025 and beyond for the commercial real estate (CRE) market. The economy looks to be on sound footing, with inflation under control, the expectation of interest rate cuts to come and GDP growth of around 1-1.5% for the year ahead.

“I would anticipate a rebound in SME lending, with borrowing appetite buoyed by lower interest rates, allowing businesses to expand and invest. Challenger banks and specialists are well poised to deliver a large share of that lending - this group of lenders has outperformed the big five banks for three straight years now, helped by their agility and focus on delivering a great experience to customers, and that is likely to continue.

“While there is optimism for improvements in CRE, we should expect to see notable variances in the recovery between different sectors. Tourism has performed incredibly well in London this year, and with the expectation of higher levels of inbound overnight stays, investors may be keener than usual to back hotels. Meanwhile, the rise of remote and flexible work arrangements will have an impact on the office market, though we are seeing suggestions of rental growth in this segment off the back of a shortage of quality office space and a potential increase in office-based employment.”

Richard Harrison, Head Mortgages, Atom bank:

“Housebuilding is clearly a big focus of the new Government, and that’s welcome. Layers of complexity within the British planning system means that as a nation we haven’t built enough homes to meet demand for decades. That housing shortage has contributed directly to the significant house price growth which has made homeownership such a difficult prospect for many first-time buyers.

“Lenders will need to embrace new-build buyers, and provide a more flexible attitude particularly around maximum LTVs, while I would also like to see a greater level of support for those with only small deposits. The rate of house price growth, hikes in rental costs and the removal of schemes like Help to Buy, has made it harder for aspiring homeowners but first-time buyers need to be able to access the housing ladder. While the Government needs to come good on its promise to build, the onus is also on lenders to be innovative in how we provide the support they need.

“The cost of living challenges of recent years has meant that more borrowers now fall into the near prime category, having had a minor credit blip. Analysis last year from the FCA said around six million Brits had missed a payment, but if those issues were temporary then they may now be looking to access mortgage finance. Given the number of would-be borrowers involved, as an industry we need to see more lenders supporting these customers not only with their needs today, but also helping them regain prime status should they show improvement.”