Demand lending to home buyers was nearly back to normal by September but future for housing market is uncertain when stamp duty holiday ends, lenders say
- House purchase lending recovered strongly in the third quarter, says UK Finance
- Review found that, by September, activity almost back to levels seen a year ago
- It also said house buying activity is likely to be strong in the first quarter of 2021
- But association said, beyond that point, demand is likely to come under pressure
Demand lending to home-buyers was nearly back to normal by September but the future of the housing market is ‘uncertain’ when the stamp duty holiday ends in March 2021, lenders have said.
House purchase lending recovered strongly in the third quarter of 2020 after the property market was put on pause earlier in the year, according to UK Finance.
In its Household Finance Review, the trade association found that, by September, activity was almost back to the levels seen a year ago.
The huge downwards spike shows when mortgage lending collapsed during the first lockdown, but then shot back up over summer and is now nearly back to normal levels
House purchase activity is likely to be strong in the first quarter of 2021 as households seek to take advantage of lending support such as the current stamp duty holiday before it closes at the end of March, it said.
However, beyond that point demand is likely to come under pressure, it added.
UK Finance also said further demand from households for support from lenders is anticipated to increase next year as employment and incomes come under strain.
Non-mortgage borrowing recovered to some extent in the third quarter, it added, but, with households still cautious amid an uncertain economic outlook, levels remain well below those seen before the coronavirus pandemic struck.
The later re-opening of housing markets in Wales, Scotland and Northern Ireland meant that mortgage activity has ‘not yet flowed through to completion to the extent we have seen in England’, according to UK Finance
Southern regions in England have all seen around a doubling of the rate of price growth to between four and five per cent in the third quarter of 2020. The association said that, in the second quarter, prices were showing ‘modest annual growth’
This graph shows the residential house activity from before the global financial crisis through to the present day. It can be seen that the collapse in lending as the credit crunch took hold was not instant
Eric Leenders, managing director, personal finance at UK Finance, said: ‘As the stamp duty holiday and current Help To Buy schemes come to a close at the end of quarter one 2021, demand for mortgages is likely to be inflated over the next couple of months – beyond that the outlook is uncertain.’
He added: ‘Payment deferral schemes have helped millions struggling with Covid-related income shocks.
‘These will now remain in place into 2021, but, with the uncertain employment outlook, there may be further pressure on households’ ability to maintain existing credit commitments. Where customers still need support, lenders stand by ready to help as required.’
— to www.dailymail.co.uk