UK Finance noted that the figures need to be taken in the context of the suppressed volumes in 2020 for the periods when the housing markets were disrupted amid wider social distancing restrictions
UK Finance has described 2021 as “a quite remarkable, expectation-busting, year for housing and mortgage markets” in its latest Household Finance Review.
“House purchase activity saw an unprecedented boom, fuelled both by COVID-19 triggered social change and the stamp duty holiday,’ the trade body said in its report. “On the back of these multiple stimuli, the number of loans to buy property increased by 41% overall.”
UK Finance noted that the figures need to be taken in the context of the suppressed volumes in 2020 for the periods when the housing markets were disrupted amid wider social distancing restrictions. The strong annual growth in 2021 partly reflects delayed activity from the previous year, it said.
“The changing work patterns and lifestyle preferences brought about by the pandemic have introduced a further boost to demand for housing outside UK cities and their traditional commuter belts. With activity levels boosted by all these factors, house prices saw very strong growth in 2021 as demand outstripped the supply of homes up for sale,” the report said.
According to Nationwide Building Society, house prices finished the year up 10% on 2020, the strongest price growth since 2004.
Read more: UK house prices – the latest.
Meanwhile, mortgage arrears fell in 2021, and the year-end position was close to the record lows seen just before the pandemic hit.
“Helped by government and industry support for incomes and payments, the number of borrowers in payment difficulties fell, contrary to expectations before the year began,” the report said.
However, as house price growth outpaces wage increases in the UK, mortgage affordability is expected to face pressure from rising inflation.
“As prices rise through the year, this will weigh more heavily on household balance sheets, particularly among lower-income households who spend proportionately more of their income on essential items, including energy and food, both of which are seeing particularly pronounced cost increases,” UK Finance said.
House purchase lending already dropped sharply in the last quarter of 2021 following the end of the stamp duty holiday.
“House purchase numbers fell in the fourth quarter following the end of the stamp duty holiday, although there are signs of continued demand for more space as working from home becomes a part of regular life. Looking ahead, the rising cost of living will likely affect appetite to buy or move home this year,” Lee Hopley, director of economic insight and research at UK Finance, said.
“2021 was fraught with economic challenges and the last months of the year were no exception, with Q4 bringing significant increases to energy bills, petrol prices and seeing interest rates rise. Inflation shows no signs of easing, and so consumer spending power is set to take a further hit this year,” Dave Harris, chief executive office at equity release lender more2life, said.
