Lenders except between 0.5 per cent and 5 per cent of borrowers to enter arrears once payment deferrals end, according to a report compiled by The Intermediary Mortgage Lenders Association.

A further 1.5 per cent of borrowers on payment holidays are expected to be able to meet interest-only payments, the report adds.

The report also warns that the “true impact” of what it calls the biggest shock to the UK economy since the Second World War will not be known until all of the various support schemes initiated by the government are wound down completely.

The association also sounds caution over any delay to a return to over-85 per cent LTV lending.

It says that, while “quite understandable” that lenders have shied away from riskier lending, a lack of availability for 90 per cent LTV and over mortgages risks creating a chicken and egg scenario, prolonging the economic downturn through a lack of first-time buyers.

“It will be early 2021 before we have a clear picture of the direction of variables such as unemployment and house prices,” says Imla, adding that a normalisation of lending criteria should occur around then as long as the economic picture is “robust”.

Imla also says that the government should consider extending the Stamp Duty holiday, claiming that ending it at the same time as the Help to Buy scheme could create problems in the new build market.

Regarding the long-term view, the report suggest that the sharp house price increases seen between April 2009 and April 2017 (up to 8.8 per cent a year in London) are unlikely to occur again as Britain claws its way out of the downturn, despite having being in a similar interest rate environment as the one we are in currently. This is because of new property taxes, such as those for foreign owners and landlords.

This very same interest rate environment also means, Imla says, that “the risk of a longer term fall in house prices is relatively low,” with borrowing costs being at historic lows – far below the Bank of England’s inflation rate target, in many cases – underpinning house price growth.

Imla executive director Kate Davies comments: “The mortgage market has remained strong and resilient in the face of Covid-19, and figures suggest that most borrowers will return from payment deferrals with little or no difficulty.

“That said, the UK’s economic recovery from coronavirus is still far from assured. While the Stamp Duty exemption will provide a boost, the government will need to be aware of the risk of another potential cliff edge for the housing market next March and it may even want to consider extending or phasing out the Stamp Duty holiday.

“Lenders are also well aware of the challenges facing consumers across the country, including FTBs, and they are eager to return to high LTV mortgages as soon as it is prudent to do so.”