Housing transactions are forecast to jump 47% to 1.5 million this year, according to UK Finance, the highest number since before the global financial crisis in 2007.

It adds that gross lending overall will peak this year at £316bn, up 31 per cent on 2020, with both lending and transactions driven by the stamp holiday, which began last June and ended in September.

The banking trade body also produced its mortgage market forecasts for the next two years.

It says lending will moderate to £281bn in 2022, before picking up to £313bn in 2023, adding that its forecasts over the next two years are “higher than the 2020 and 2019 figures and represent a return to more stable levels of activity”. 

UK Finance principal, data and research James Tatch says: “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 a 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.” 

The association adds: “The housing market will inevitably 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. 

“However, other Covid-19-triggered behavioural changes, most significantly the resurgence in homemover numbers following a decade of stagnation, are likely to provide some continued impetus.”

It adds that in the third quarter of this year, “homemover activity has been reinvigorated after a decade of stagnation by changing attitudes to working from home, particularly as remote working is now embedded in many businesses’ longer-term policies. 

“The lack of a daily commute for many existing homeowners who were previously constrained by relatively low levels of equity with which to “staircase up” the housing ladder within the city they work means they can now consider different locations where their existing equity will go further.”

The body says the main driver of lending in 2021 has been house purchases – up 53% year-on-year to £200bn – whereas homeowner remortgaging activity will be slightly down on last year at £62bn.

It adds buy-to-let activity this year has followed a similar path to the residential sector, with purchase activity increasing to £18bn, up 83% on 2020.

The body says: “The outlook for both lending and ongoing mortgage affordability is much improved compared to forecasts made a year ago.”