Growth in the mortgage market is set to continue in 2021, despite the ongoing disruption of the COVID-19 pandemic, according to a new report by the Intermediary Mortgage Lenders Association (IMLA).

IMLA’s latest report, New Normal, has predicted a rise in gross mortgage lending to £283bn this year, as well as a return to more household spending once coronavirus lockdown restrictions are eased.

The report, which makes a series of predictions about the mortgage market over the coming year, suggested that household finances “remain robust and will continue to weather the current economic volatility”.

IMLA’s predictions follow data which showed the number of mortgage borrowers on payment deferrals at the end of 2020 had fallen from a peak of more than 1.8 million in June, to just 127,000 by 20 November.

This data also revealed the number of mortgages in arrears of three to six months continued to fall in the third quarter to just 0.28% of all loans – the lowest figure since current records began. IMLA suggested this combination of factors indicates that the UK’s mortgage market will not face an arrears crisis in 2021.

The findings also found that while household consumption was constrained by lockdown measures last year, the subsequent build-up of household cash balances – £222bn between February and November, an average of £13,400 for a family of four – provides the opportunity for a rapid return to spending in 2021.

IMLA executive director, Kate Davies, commented: “Many have predicted doom and gloom for the housing market since the crisis began. However, our analysis shows there is room for more optimistic thinking.

“Since the first lockdown back in March, the mortgage market has shown remarkable resilience. Spending more time at home has led many to reconsider their living arrangements, helping to boost demand for homes across the UK.

“This surge in interest has been supported by the government’s stimulus package, which in most cases has helped to support individuals far better than has been the case in previous financial crises. The combination of these factors leads us to believe that 2021 will be a year of modest growth for the housing and mortgage markets.”

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