Mortgage

UK mortgage lending surges to record high of £316bn for 2021

UK mortgage lending surges to record high of £316bn for 2021
Written by Publishing Team

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The outlook for the housing and mortgage markets over the next two years is to return to a more stable and balanced picture following the turmoil of the past two years. Photo: Getty Images

New data revealed that 2021 was a record year for mortgage lending amid the stamp duty holiday and people moving away from cities as remote work becomes the norm.

UK Finance estimates total mortgage lending overall will peak this year at 316 billion pounds ($417 billion), up 31% from 2020, then moderate to 281 billion pounds in 2022.

It then expects it to rise to £313 billion in 2023.

While the aggregate lending numbers for 2022 and 2023 will be reductions at the peak of 2021, they are higher than the 2020 and 2019 numbers and therefore represent a return to more stable levels of activity.

The housing market is expected to weaken next year, as stimulating demand from the stamp duty holiday will no longer be a factor boosting home purchases. But other behavioral changes brought about by the Covid-19 virus, such as the resurgence of the number of housewives, are likely to provide continued impetus.

“The outlook for the housing and mortgage markets over the next two years is to return to a more stable and balanced picture following the turmoil of the past two years,” said James Touch, director of data and research at UK Finance.

Read more: UK mortgage approvals fall as market slows

“While risks remain, both for new lending and affordability, the market appears to be emerging from the pandemic in a better place than previously anticipated, buoyed by a much-improved broader economic outlook.”

UK Finance expects home purchases to total 1.5 million in 2021, up around 47% from last year and the highest number since before the financial crisis.

Higher inflation is expected to put pressure on real income next year, hurting affordability as measured in income and spending assessments of mortgage applications.

Moreover, the possibility of bank rate increases over the next two years may also put pressure on affordability, although this is likely to be relatively modest.

A report last month showed that mortgage approvals for home purchases fell to 67,200 in October from 71,900 in September, after the stamp duty holiday was withdrawn at the end of September.

The calm is a testament to how busy the housing market has been over the past year. According to the research, 2021 is set to be the UK’s busiest property market in 14 years in terms of property transactions, as the pandemic has led to a search for homes with more space.

Watch: How Much Money Do I Need to Buy a Home?

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