2021 has been a record year for mortgage lending with gross mortgage lending set to hit £316bn for the year, according to the latest UK Finance estimates.
However, the association reckons that lending will return to a more moderate £281bn in 2022, followed by £313bn in 2023.
Both 2022 and 2023 gross lending figures, whilst a reduction on the 2021 peak, are higher than the 2020 and 2019 figures and so represent a return to more stable levels of activity.
James Tatch, principal, data and research at UK Finance, said: “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.”
UK Finance expects total house purchase transactions to reach 1.5 million in 2021, about 47% higher than last year and the highest number since before the financial crisis.
Rising inflation is expected to put a squeeze on real incomes next year, which will hurt affordability as measured in income-expenditure assessments for mortgage applications.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “It is no surprise that 2021 is set to be a record year for the mortgage market, on a par with 2007.
“The stamp duty holiday, coming on the back of an increased desire to leave cities and other urban centres for more green space, created the perfect storm for the housing market. Shortage of stock has led to a surge in pricing, while cheap mortgages have enabled people to stretch themselves and buy houses they could only have dreamed of.
“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.”
