This is according to Eric Leenders, managing director, personal finance at UK Finance who was reacting to the body’s latest Household Finance Review for Q3.

The report indicated house purchase lending in Q3 had ‘recovered strongly’ from the collapse in Q2. By September, the review revealed, activity was nearly back to the levels seen a year ago.

Looking at mortgage applications, the data suggested a possible return to annual growth in Q4, but UK Finance feared the recent second wave of lockdowns might have an impact on this.

It forecast activity Q1 2021 was likely to be strong as households sought to take advantage of lending support such as the stamp duty holiday and current Help-to-Buy scheme before the end-of-March deadline. After this, it said, demand would come under pressure.

The pause on court proceedings for possessions along with government support meant arrears were static in Q3, UK Finance revealed. And it said this was set to continue in Q4.

The report predicted demand for lender support was anticipated to increase next year as employment and incomes came under strain, but the fundamentals behind lending, together with lenders’ forbearance tools, should help to mitigate payment problems.

Leenders said: “In third quarter of 2020 the economic and logistical impacts of lockdown receded somewhat, facilitating a strong rebound in the housing market, yet recent further regional lockdowns and tighter restrictions may dampen this to some extent.

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.”

Industry views

Richard Pike, sales and marketing director of Phoebus Software, said the rise in activity during Q3 couldn’t have been predicted.

“The stimulus of the stamp duty payment holiday that the government hoped would give the market a boost after lockdown, did exactly that,” he said.  “There was also so much pent up demand when we came out of the first lockdown, which shocked estate agents, advisers and lenders alike.

“With the industry currently lobbying the government regarding the cut-off date for the stamp duty holiday, we hope to see some decision shortly which will prevent applications in the pipeline from falling off the cliff on 31 March.

“As we head into 2021 and unemployment figures inevitably rise, the question of mortgage repayments will become an issue.  Lenders will need to be prepared and forbearance will no doubt be top of the government’s list of requirements.  To that end lenders should now be training and recruiting as their collections departments will no doubt be under some pressure.”