Mortgage lending should reach £283bn in 2021, recovering from a year subdued by the pandemic, according to the Intermediary Mortgage Lenders Association’s New Normal report.
Gross lending reached an estimated £241.6bn in 2020, as the market was forced to almost stop completely before the stamp duty holiday fired up demand.
A reduction in household consumption due to the pandemic has resulted in the build-up of household cash balances, according to IMLA. This should provide the opportunity for a rapid return to spending in 2021.
Kate Davies, executive director, IMLA, said: “Many have predicted doom and gloom for the housing market since the crisis began. However, our analysis shows there is room for more optimistic thinking.
“Since the first lockdown back in March, the mortgage market has shown remarkable resilience. Spending more time at home has led many to reconsider their living arrangements, helping to boost demand for homes across the UK.
“This surge in interest has been supported by the government’s stimulus package, which in most cases has helped to support individuals far better than has been the case in previous financial crises. The combination of these factors leads us to believe that 2021 will be a year of modest growth for the housing and mortgage markets.”
The report also called for an extension or tapering of the stamp duty holiday, which was due to end on March 31st, to prevent homebuyers missing out on the reduction.
Meanwhile IMLA hit out at stress tests, saying the 3% mortgage stress test introduced in 2014 is no longer relevant to market conditions, given that long-term interest rates have fallen since then.
Davies added: “This year presents an opportunity for positive change in the housing and mortgage market. While the market faces immediate challenges in the form of the stamp duty deadline, there is a clear opportunity once we are through this crisis to lay the foundations for a sector which is more vibrant, fair and efficient than what has come before.
“A coherent, long-term housing strategy from the government, including the delivery of thousands of new homes for a new generation of homeowners, and collaboration with the mortgage industry to enable those homes to be purchased will be vital to delivering a market that meet Britain’s housing needs for the decades to come.”
This post has originally been featured in Property Wire.