According to UK Finance, high levels of house purchasing in December led to lending which was 31% higher than in 2019 during the fourth quarter of 2020.

The effects of Covid on the market in Q2, however, meant mortgage lending was lower in 2020 than in 2019. But the buoyant Q4 activity meant it was still higher than expected.

Buy-to-let also experienced the highest purchase activity since Q1 in 2016, which was just prior to the 3% stamp duty surcharge on second properties.

And the report also revealed remortgages with equity withdrawn had become more popular in the fourth quarter of 2020. UK Finance said the average value of money had increased, which was driven by deposits for second homes, new buy-to-lets or to assist children with deposits to get onto the property ladder.

Eric Leenders, managing director, personal finance, at UK Finance said: “Homebuyers looking to take advantage of the stamp duty holiday were behind the housing market’s strongest quarter for purchases in 13 years, in the final quarter of 2020.

“Despite this uptick in activity, annual purchases for the whole year were around a tenth lower than the previous year, due to a complete shutdown of the market in the first lockdown.

“The stamp duty holiday helped to boost activity at the end of 2020, and it is likely many of these purchases have been brought forward in order to take advantage of the savings.”

Buy-to-let bouncback

UK Finance’s data also revealed Q4 2020 saw the highest purchase activity since Q1 2016 which was when landlords looked to complete sales ahead of the introduction of a stamp duty surcharge on second homes.

It said there were 22,500 loans written for buy-to-let purchases with £3.4 billion lent to purchase properties in this market.

Richard Rowntree, managing director of mortgages at Paragon Bank, said landlords, like residential buyers, were reacting to the stamp duty exemption and also strong levels of tenant demand.

“The strong final quarter helped the buy-to-let sector recover some of the lost ground from the early days of coronavirus and overall lending for the year was down just 13% on 2019 at £37 billion,” he said.

“I’m sure many in the industry would have feared a much worse result when the housing market was closed, so the bounce back during the second half of 2020 was encouraging, demonstrating the sector’s resilience and effective response to the pandemic.”

He added: “I anticipate that we will continue to see strong levels of house purchase activity in the first and second quarters of 2021 as landlords complete transactions ahead of the Stamp Duty holiday deadline.

“The sector is prepared to manage the pipeline to ensure that those who have entered into the property buying process are able to complete before the new 30 June deadline, announced yesterday as part of the budget.”

He added: “The figures have also revealed that the general downward trend in remortgage activity seen since 2018 has continued.

“We anticipate that this will be reversed and new business in Q2 will be driven by remortgage activity as significant numbers of five-year fixed rate mortgages, which increased in popularity in response to the introduction of the buy-to-let Stamp Duty surcharge in April 2016, are set to reach maturity.”

Remortgaging

The popularity of remortgages with equity withdrawn, driven by deposits for second homes, new buy-to-lets or to assist children with deposits to get onto the property ladder, also piqued the interest of later life experts.

Indeed, the later life lender, more2life, said while many thought the government, initially, wanted to help those at the foot of the property ladder to move, its own data suggested the holiday had encouraged considerable activity amongst homeowners over 55.

It said the proportion of more2life customers using equity release to raise the finance for a property purchase had tripled in recent months.

Dave Harris, CEO at more2life, said: “Using built up housing equity to buy a new or second home is yet another way in which equity release is helping homeowners in later life, especially in the current climate, and illustrates the wide-ranging benefits of lifetime mortgages.”