UK Finance: Purchase activity to weaken in Q4 and rebound in 2021

Rental Property

Purchase activity is likely to be strong in the first quarter of 2021, as households look to take advantage of the stamp duty holiday and Help to Buy, UK Finance’s Household Finance Review.

However, the second wave of lockdowns is likely to impact activity in the final quarter of 2020.

Lending recovered in the third quarter from the second.

Eric Leenders, managing director of personal finance at UK Finance, 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.

“As the stamp duty holiday and current Help to Buy schemes come to a close at the end of Q1 2021, demand for mortgages is likely to be inflated over the next couple of months – beyond that the outlook is uncertain.”

Tomer Aboody, director of property lender MT Finance, said: “The market performed strongly in the third quarter, which is no surprise considering lenders’ liquidity and support from the government via the furlough scheme, help to buy, the stamp duty holiday and encouraging banks to offer higher loan-to-value mortgages.

“How this will potentially all change come March is a concern and the government needs to be cautious so as not to allow the confidence in the market to dissipate, as the furlough scheme ends at the same time as the stamp duty break.

“Research has shown that the stamp duty saving has probably been paid for via an increase in property values. But with mortgage rates at all-time lows, homebuyers are taking on affordable debt and therefore the higher values are managed within the mortgage payments.”

Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “These figures, though a little dated, are interesting not just because they represent a useful lead indicator of future activity but demonstrate clearly how the housing market defied the downturn in the rest of the economy just a few months ago.

“Driven by the stamp duty holiday and pent-up demand following lockdown, buying and selling shows little sign of abating although we are certainly now in a quieter period as many have taken advantage of the concession and seasonal concerns are taking precedence.”