This year is expected to be the strongest year for mortgages since 2007, after the stamp duty holiday and a wave of homeworkers leaving cities, according to a trade association.
An estimated Â£ 316 billion in home loans were made this year, said UK Finance, up almost a third (31%) from 2020.
This is expected to be the highest total since gross lending reached Â£ 357 billion in 2007.
Home purchases were the main driver of lending in 2021, while homeowners’ re-mortgage activity declined slightly from last year, UK Finance said.
He also predicted lending would moderate to Â£ 281 billion in 2022, before rising to Â£ 313 billion in 2023.
The housing market will inevitably slow down in 2022 compared to this year, UK Finance said, as demand for the stamp duty holiday, which ended in England and Northern Ireland in October, will no longer stimulate purchases of housing.
However, other behavioral changes triggered by Covid-19, including the resurgence in the number of movers after a decade of stagnation, are likely to provide continued momentum, he added.
Flexible working is now built into the long-term policies of many companies, which means that a daily commute is less of a consideration for many movers.
They can now consider different places where their money could go more.
Refinancing activity is expected to pick up slightly next year and accelerate somewhat in 2023.
A higher number of fixed rate mortgage transactions, including five-year transactions concluded in 2017, are expected to end and the loans will become eligible for refinancing.
Total home purchase transactions, including cash purchases, will reach 1.5 million in 2021, UK Finance said, up 47% from 2020 and the highest number since before the financial crisis global.
James Tatch, Director of Data and Research at UK Finance, said: â2021 has been a banner year for mortgages amid the stamp duty holidays and homeworkers leaving the cities.
âThe outlook for the housing and mortgage markets over the next two years is to return to a more stable and balanced picture after the upheavals of the past two years.
“While risks remain, both to new loans and continued affordability, the market appears to be emerging from the pandemic in a better place than expected, supported by a broader and significantly improved economic outlook.”
UK Finance has said the coronavirus pandemic adds uncertainty to its forecast – and the picture of unemployment after the leave scheme ends is still not entirely clear.
Rising inflation will strain real incomes next year, and the potential for the Bank of England’s base rate hike over the next two years could also put pressure on affordability, though. that the magnitude of any increase is likely to be relatively modest, UK Finance said.