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Housing market set to soften in 2022 after bumper year

Christina Hoghton
Written By:
Christina Hoghton
Posted:
Updated:
14/12/2021

2021 will be a record year for lending, after which it’s inevitable the market will return to more moderate levels

Mortgage lending is expected to fall significantly in 2022, according to the latest forecasts from UK Finance.

The banking trade organisation said it expects 2021 to be a record year for lending, followed by a fall in 2022.

It has forecast that gross lending overall will peak this year at £316bn, up 31 per cent on 2020, before falling to £281bn in 2022.

It also estimated that the total number of house purchases will have reached 1.5 million in 2021, 47 per cent higher than 2020 and the highest number since before the Global Financial Crisis.

James Tatch, principal, data and research at UK Finance, said: “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 more stable, balanced picture following the upheavals of the last two years.

“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.”

A return to moderate growth

UK Finance said it was inevitable that the housing market would soften in 2022 compared to this year, ‘as the demand stimulus from the stamp duty holiday will no longer be a factor boosting house purchases’.

But it added that the homemoving boost triggered by Covid-19-triggered was likely to provide some continued impetus.

But there are downside risks from the labour market and rising inflation squeezing real incomes next year. UK Finance noted that potential Bank Rate increases over the next two years would ‘place pressure on affordability’.