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UK mortgage lending anticipated to hit record levels in 2021

UK mortgage lending anticipated to hit record levels in 2021
Jordan Major

Housing transactions are expected to exceed 1.5 million in 2021, a 47% increase over the previous year and the largest amount seen since before the Global Financial Crisis, The Independent reports citing UK Finance data. 

The trade association expects total loans to reach a high of £316 billion this year, a 31% increase over the previous year, then drop to £281 billion in 2022 before rebounding to £313 billion in 2023. 

Remortgaging is expected to be down somewhat from last year’s level of £62 billion, with home purchases (£200 billion, up 53% from 2020) being the primary driver for lending in 2021. 

With purchase activity climbing to £18 billion in 2019, an 83% increase, buy-to-let activity has followed a similar pattern to the residential sector. Principal, data, and research at UK Finance, James Tatch, stated:

“While risks remain, both to new lending and ongoing affordability, the market looks to be emerging from the pandemic in a better place than previously anticipated.”

Decrease in lending in 2022 as stamp duty expires

When compared to this year’s housing market, UK Finance predicts that the market will naturally weaken in 2022 due to a decrease in demand due to the stamp duty holiday, which expired in England and Northern Ireland in October and will no longer be a driving force behind home purchases. 

On this note, Tatch confirmed: 

“2021 has been a record year for mortgage lending amid the stamp duty holiday and homeworkers moving from cities.”

He added:

“The outlook for the housing and mortgage markets over the next two years is for a return to a more stable, balanced picture following the upheavals of the last two years.”

But other Covid-19-induced behavioral shifts, such as an increase in the number of people moving into their first house after a decade of stasis, are expected to give some further impetus in the future. 

Workplace flexibility is already ingrained in many firms’ longer-term practices, which means that for many house movers, a daily drive is no longer a significant concern; as a result, buyers are free to look into other locations for investing those funds. 

Nevertheless, UK Finance highlighted that the Coronavirus pandemic has created uncertainty in its projections and that the post-furlough job market scenario is still not fully clear.

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