£200 BILLION!? Why 2021 was a huge year for mortgage lending

New data reveals that mortgage lending jumped in 2021 – a clear sign the booming housing market is unlikely to slow. So what else does the data reveal?

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New data reveals that 2021 has seen the highest amount of mortgage lending since the 2008 financial crash. So far this year, a massive £200 BILLION has been lent to budding home buyers.

So what else does the data reveal? And what will the mortgage market look like next year? Let’s take a look.

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What has mortgage lending looked like in 2021?

According to UK Finance, banks lent a massive £361 billion in 2021. And £200 billion of this was used to finance property purchases.

The government’s Stamp Duty holiday was a big reason why people chose to move home this year, according to UK Finance. The tax holiday ended in September.

In total, 1.5 million people have moved home in 2021. That’s almost a 50% increase on last year and is officially the highest figure seen since the 2008 financial crash.

Taking into account these figures, it’s clear to see that 2021 has been a year like no other for the housing market. This year, we have seen average house prices skyrocket to well over a quarter of a million pounds. 

What will the mortgage market look like next year?

Despite these extraordinary numbers, UK Finance suggests mortgage applications will fall in 2022, partly because there will be no Stamp Duty holiday next year. The trade body predicts mortgage lending will drop by a cool £35 million in 2022.

In terms of banking transactions, UK Finance predicts they will decrease by almost 25%, to 1.17 million, next year. The company also predicts gross lending will fall by 11%. 

While these numbers suggest the overall housing market will cool in 2022, UK Finance does highlight the fact that reasons for moving home during the pandemic – such as the ‘race for space,’ and the growth of remote working – will continue to play a part in supporting a high number of transactions next year.

This is explained by James Tatch, principal analyst at UK Finance, “2021 has been a record year for mortgage lending amid the Stamp Duty holiday and homeworkers moving from cities.

“The outlook for the housing and mortgage markets over the next two years is for a return to a more stable, balanced picture following the upheavals of the last two years.”

Tatch goes on to explain that the mortgage market will be supported by a healthier economic outlook next year. He explains, “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.”


What else does the data reveal?

Aside from residential mortgage lending, UK Finance’s data also reveals that 2021 has been a good year for landlords. That’s because buy-to-let purchase activity increased by a whopping 83% this year, to £18 billion.

Interestingly, the trade body suggests that buy-to-let activity is likely to drop by almost a third in 2022. It seems some landlords could be put off by new energy efficiency requirements set to be phased in by 2025. Some organisations are even suggesting that landlords could be persuaded to leave the sector due to the changes!

More widely, UK Finance warns that 2022 could be a year in which the UK suffers from crippling inflation. The trade body says this could lead to increased unemployment. If this happens, then it could have a significant knock-on effect on the housing market.

On a related note, UK Finance predicts home repossessions will increase by a staggering 267% next year, to hit 7,700, partly due a lack of any mortgage holidays. These were a common theme in 2020 when many homeowners made full use of the lifeline during the early waves of the pandemic. 

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