House purchase lending in the fourth quarter of 2020 grew to the highest quarterly levels seen since 2007, new figures published by UK Finance have revealed.

The banking body stated that this was led by December levels climbing 31% higher than the level seen a year earlier.

UK Finance’s latest Household Finance Review also confirmed that while mortgage lending was lower in 2020 than in 2019 as a result of the decline in lending in Q2, it was still “higher than expected” due to the high Q4 activity.

Although the year-on-year change in Q4 completions matched that of applications in the previous quarter, UK Finance suggested the recovery was stronger than expected because of the potential for local and national lockdowns through Q4 to disrupt activity.

Over the whole of 2020, the growth in house purchase volumes in Q4 was not sufficient to recover the lost activity from Q2, where purchase activity dropped by around 50% due to the first set of national lockdowns. UK Finance stated that purchase activity was down by around 25% in the first three quarters of 2020, a deficit which reduced to only 12% by the end of the year.

UK Finance managing director, personal finance, Eric Leenders, commented: “Homebuyers looking to take advantage of the stamp duty holiday were behind the housing market’s strongest quarter for purchases in 13 years, in the final quarter of 2020.

“The stamp duty holiday helped to boost activity at the end of 2020, and it is likely many of these purchases have been brought forward in order to take advantage of the savings.

“The Chancellor’s announcement in the Budget to extend the stamp duty holiday until the end of June before then phasing it out will prevent a cliff edge, reducing the risk of house sales collapsing and will prove beneficial for all parties involved in the housing market.”

TMA Club development director, Lisa Martin, suggested the statistics are “testament to the hard work of brokers and lenders over the past few months”.

“The dedication of these two groups has ensured that borrowers have been able to progress with cases amid the uncertainty caused by the pandemic,” Martin said.
 
“The measures announced by the Chancellor in yesterday’s Budget will go a long way towards supporting the mortgage market in the coming months and helping advisers in their conversations with clients, especially when it comes to borrowers with lower deposits, where the new 95% scheme provides further options for customers.

“As households continue to be impacted by the pandemic, professional expertise from an adviser could make all the difference to customers’ long-term financial health, and I am confident that we will see this community, as well as lenders, rise to the challenge over the next quarter.’’

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