Eventually, after the club was relegated in 2002–03 and David James moved to Manchester City in January 2004, Bywater became a regular starter in the first-team, making 23 appearances as West Ham reached the First Division play-off final, where they were beaten 1–0 by Crystal Palace. He signed a three-year contract extension in June 2004, saying "I am very pleased to have signed on for another three years at West Ham. We were very unlucky last year and I am sure that we will start next season with a squad capable of challenging for promotion again. The club have invested a lot in my career and the manager showed great faith in me last season. I am determined to repay everyone at the club by helping the team back into the Premiership."