Mortgage borrowing set to slow after record year

Lenders’ umbrella group UK Finance has given its housing and mortgage market forecasts for 2022 and 2023 together, plus a year-end report for 2021.

It estimates that total house purchase transactions - including cash purchases as well as mortgaged purchases - will reach 1.5m this year which is 47 per cent higher than 2020 and the largest total since 2007. 

Buying homes rather than remortgaging will be the key driver in this surge, it says - house purchases will account for £200 billion of borrowing against £62 billion for remortgaging. 

Buy to let has also had a strong year, with purchase activity increasing to £18 billion, up no less than 83 per cent on 2020.

James Tatch, of the data and research division at UK Finance, says: “2021 has been a record year for mortgage lending amid the stamp duty holiday and homeworkers moving from cities. 

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

“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, supported by a much-improved wider economic outlook.”

In response to the data, Mark Harris - chief executive of mortgage broker SPF Private Clients - says: “It is no surprise that 2021 is set to be a record year for the mortgage market, on a par with 2007.

“It is also inevitable that the market will calm down next year; indeed, we have already started to see this. Many people brought forward purchases in order to take advantage of the stamp duty holiday; now that has passed, there is less of a frenzy, although there is still plenty of demand and while interest rates remain low, that will continue to fuel the market.

“Interestingly, UK Finance expects activity to pick up again in 2023 after a quieter 2022, mainly due to a pick-up in remortgage activity. Many people taking out cheap fixes in the past year will find those maturing and will be looking for another deal, at a time when interest rates could well be higher than they are now.”