This year will set a new record for mortgages with £316billion lent in total, of which £200billion went to people moving house.
This is the highest amount lent each year since before the global financial crisis.
Total home purchases are expected to reach 1.5million by the end of the year, according to UK Finance, a 47% increase on 2020 and again the highest number since the financial crisis.
New home purchases accounted for 64% of total mortgages distributed as people moved in droves. The figure increased by 53% compared to last year.
But borrowing could fall by £35bn in 2022 as the housing market stabilises, according to lending industry forecasts.
People moving due to the stamp duty suspension has led to a surge in mortgage lending in 2021, according to UK Finance – although it said lending would fall by £35billion in 2022
However, the banking trade association predicted that home buying activity will fall next year, with transactions down 24% to 1.17 million and gross loans down 11% to 281 billion. pound sterling.
This, he said, was because the stamp duty holiday, which drove home purchases between July 2020 and September 2021, had ended.
But he also claimed that other pandemic factors, such as spending less time in the office and the need to find space to work from home, would continue to drive home moves to some extent.
And the banks predict that in 2023 lending will increase to £313bn.
While gross lending figures for 2022 and 2023 will be reductions from the 2021 peak, they are above figures for 2020 and 2019 and UK Finance said this represented “a return to more stable levels of activity” .
Buy-to-let activity followed a similar trajectory to the residential sector in 2021, with buy-to-let activity reaching £18 billion, up 83% on 2020.
However, UK Finance predicted this would fall by 31% in 2022, to £13bn, before falling back to £12bn in 2023.
Gross mortgages hit record high in 2021 as housing market soars
This could be due to factors such as upcoming energy efficiency requirements for rented accommodation and calls for licensing for landlords.
James Tatch, director, data and research at UK Finance, said: “2021 has been a record year for mortgages amid stamp duty holidays and homeworkers leaving cities.
“The outlook for the housing and mortgage markets over the next two years predicts a return to a more stable and balanced picture after the turmoil of the past two years.
“While risks remain, both for new lending and continued affordability, the market appears to be emerging from the pandemic in a better place than expected, supported by a much improved broader economic outlook.”
Remortgaging took a hit in 2021 as more moved
Remortgage activity has taken a hit in 2021, with the amount lent falling from £80bn before the pandemic in 2019 to £62bn.
This is partly because more people have moved rather than refinanced their existing home.
UK Finance said remortgage activity will increase next year, with a total of £69bn on loan, an 11% increase on 2021.
He also said there would be a remortgage boom in 2023, with loans rising to £93billion as more five-year fixed rate deals come to an end. reflecting a strong market in 2017.
Arrears on the rise
UK Finance also identified risks going forward, including rising inflation and the potential for unemployment to rise once the furlough scheme ends.
Both, he said, would result in fewer people deciding to move because it would be more difficult to pass the affordability checks imposed by lenders.
He also said cases where there were arrears of more than 2.5% of the mortgage balance would rise by 26% to 102,000.
In addition, it predicts a sharp increase in foreclosures, which are expected to increase by 267% in 2022, to reach 7,700.
Mortgages in arrears of more than 2.5% the total balance are expected to rise next year, UK Finance says, due to unemployment and rising inflation
The financial industry trade body also said foreclosures will increase in 2022
However, figures for 2021 were low as foreclosures were banned for part of the year under Covid financial support rules.
Lenders were instructed not to apply for a warrant of possession from the start of the pandemic until April 1, 2021, and an eviction ban was in place until the end of May 2021 in England and the end of June 2021 in the Country of Wales.
UK Finance played down the impact of a rise in the Bank of England’s key interest rates, which could take place as early as December 16 during the next meeting of the Bank’s Monetary Policy Committee.
A rise in the base rate from its all-time low of 0.1% would likely lead to higher mortgage rates.
However, UK Finance said the planned uptick would only “modestly” increase the number of people in arrears.
“The potential for bank rate increases over the next two years would also put pressure on affordability, although the magnitude of any increase (and resulting pressure on affordability) is likely to be relatively modest and affordability testing makes them manageable for variable-rate borrowers whose household budgets are otherwise stable,” its report says.
“About three-quarters of outstanding mortgages are at fixed rates and would see no immediate impact on their payments if rates increased.”
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