Mortgage lending to home-buyers recovered to nearly-normal levels by September, after collapsing earlier this year, according to a trade association.
But looking ahead, beyond March 2021 when the stamp duty holiday ends, UK Finance said the outlook for mortgage demand is “uncertain”.
Its latest Household Finance Review said house purchase lending recovered strongly in the third quarter of 2020 after the property market was put on pause earlier in the year. By September, activity was almost back to the levels seen a year ago.
House purchase activity is likely to be strong in the first quarter of 2021 as households seek to take advantage of lending support such as the current stamp duty holiday before it closes at the end of March, it said.
However, beyond that point demand is likely to come under pressure, it added.
UK Finance also said further demand from households for support from lenders is anticipated to increase next year as employment and incomes come under strain.
Non-mortgage borrowing recovered to some extent in the third quarter, it added, but, with households still cautious amid an uncertain economic outlook, levels remain well below those seen before the coronavirus pandemic struck.
Eric Leenders, managing director, personal finance at UK Finance, said: “As the stamp duty holiday and current Help To Buy schemes come to a close at the end of quarter one 2021, demand for mortgages is likely to be inflated over the next couple of months – beyond that the outlook is uncertain.”
He added: “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.”