Gross lending in 2021 could beat previous forecasts, which already predicted the highest levels for more than a decade, experts suggest.

Speaking on the Accord Mortgages Growth Series podcast, Intermediary Mortgage Lenders’ Association principal researcher Rob Thomas and UK Finance director of mortgages Charles Roe both explained that measures announced in the Budget could drive lending figures beyond their earlier forecasts.

Thomas initially forecast £283bn gross lending for the year which would be the highest total since 2007.

However, he revealed if he was reforecasting today, he would suggest an even higher figure, as a result of government measures to stimulate the market such as the stamp duty holiday extension and the mortgage guarantee scheme.

Thomas says: “What we are forecasting for 2021 is in line with the monthly average of gross lending in 2020, excluding the three months of lockdown in April-June. 

“The market has performed well during the pandemic, lenders have done an extraordinary job and demand has been far higher than people expected. 

“There was a lot of talk about a house price collapse and we’ve seen exactly the opposite.”

While UK Finance originally made a lower forecast than IMLA, for similar reasons Roe says the trade body’s prediction of £215bn would also be revised upwards if analysis was carried out today. 

A combination of positive factors, including the vaccine rollout have influenced his outlook.

Roe says: “I think we can expect increased demand from borrowers looking to squeeze in a purchase before the first or second step down in stamp duty, but advisers also need to take into account the end of the furlough scheme and what that means for borrowers, and the ending of the mortgage payment deferral scheme as there will be some customers who may find their mortgage is unaffordable and look to downsize.

“Product transfers are also likely to be a continuing feature for some customers as we’ve seen over the last nine months.

“It will be interesting to see how brokers adapt to the new normal, working remotely, which they’ve done with remarkable resilience in the last year.”

Thomas adds: “It’s worth paying attention to inflation because there’s a risk that if we see that money [an average of £14,000 increased savings per household], being spent quickly we could see what I’d describe as a mini-boom in the economy, particularly in some sectors, where you could see some pressure on inflation.

“That’s important for the housing market too as we could see upward movements in interest rates later in the year, which is one argument for borrowers fixing their mortgage.”

Accord managing director Jeremy Duncombe says: “The last 12 months have had a monumental impact on the economy and in this latest Growth Series podcast it is fascinating to hear both Rob and Charles discuss the knock-on effects to the housing market and the reasons behind their differing gross lending forecasts.

“We discussed how this might affect how much and what type of business a broker can expect to write this year, and what advisers can learn from leading economic forecasts to improve their conversations with clients.”