"Demand for mortgages is likely to be inflated over the next couple of months - beyond that the outlook is uncertain."
House purchase lending in Q3 recovered strongly from the collapse in Q2 and, by September activity was nearly back to the levels seen a year ago, according to the latest research from UK Finance.
Its data points to a possible return to annual growth in Q4, but warns that the recent second wave of lockdowns may impact this.
UK Finance says purchase activity is likely to be strong in Q1 2021 as households seek to take advantage of lending support such as the stamp duty holiday and current Help to Buy scheme before their end-March closure; but beyond this point demand is likely to come under pressure.
Despite the recovery in Q3, UK Finance estimates that around 130,000 purchase loans did not take place between April and September, compared to the number that might have otherwise completed in those six months.
UK Finance says this figure is useful to temper any “return to trend” observations with the point that, regardless of the Q3 rebound, total house purchase mortgage activity for the first nine months of 2020 is nearly a quarter lower than in the same period in 2019.
Eric Leenders, managing director of personal finance at UK Finance, commented: “In third quarter of 2020 the economic and logistical impacts of lockdown receded somewhat, facilitating a strong rebound in the housing market, yet recent further regional lockdowns and tighter restrictions may dampen this to some extent.
“As the stamp duty holiday and current Helpto-buy schemes come to a close at the end of Q1 2021, demand for mortgages is likely to be inflated over the next couple of months - beyond that the outlook is uncertain.
“Payment deferral schemes have helped millions struggling with Covid-related income shocks. These will now remain in place into 2021, but with the uncertain employment outlook, there may be further pressure on households’ ability to maintain existing credit commitments. Where customers still need support, lenders stand-by ready to help as required.”
Vikki Jefferies, proposition director at Primis Mortgage Network, added: “These figures make it clear that the mortgage market continued its recovery during the third quarter of 2020. Lending volumes saw an uptick throughout this period as lenders ensured that borrowers could still access the solutions they needed, and advisers helped clients progress with their cases amid the disruption caused by Covid-19. Today’s statistics are testament to the hard work of these two groups, and their efforts will continue to fuel the recovery of the housing sector as the crisis endures.
“It will be crucial for advisers to continue to support customers with their decision-making, however, not only in areas such as mortgages and refinancing, but protection as well. As households continue to be impacted by the pandemic, guidance from a broker could make a big difference to the long-term financial health of consumers. It’s a broker’s responsibility to ensure their clients’ finances are protected against possible hardship, so putting adequate cover in place for clients should always be front of mind – especially in the current climate.”