House purchase lending and unsecured lending recovered in the third quarter, UK Finance research has revealed.
The trade body’s quarterly household finance review found that by September house purchase lending was nearly back to the levels seen a year ago.
Purchase activity is predicted to be strong in the first quarter next year as households seek to take advantage of the stamp duty holiday and current Help to Buy scheme before their end-March closure. However, beyond this point demand is likely to come under pressure.
“I think it’s very evident that the stamp holiday increased activity significantly with people rushing to buy and prices and transactions rising,” said Filip Karadaghi, co-founder and chief executive of LandlordInvest.
“We had more enquiries for quite some time. I think this economic activity will continue to at least the first quarter next year.
“There’s also the impact of Brexit whatever that may be, the market has factored into account Brexit uncertainty, but it takes time for people to decide whether to purchase property and there can be delays in the process.”
Meanwhile, unsecured borrowing has recovered somewhat in the third quarter, but with households still cautious against an uncertain economic outlook, levels remain well below pre-Covid levels.
New borrowing reached £14.2bn at the end of the third quarter, up from £8.7bn at the peak of the lockdown in April.
“Unsecured borrowing continued to recover but, with consumer confidence still fragile and reduced day to day spending generating savings for some households, levels remain considerably below those seen before the pandemic,” said Eric Leenders, managing director, personal finance at UK Finance.
“Payment deferral schemes have helped millions struggling with Covid-related income shocks.
“These will now remain in place into 2021, but with the uncertain employment outlook, there may be further pressure on households’ ability to maintain existing credit commitments.
“Where customers still need support, lenders stand-by ready to help as required.”
The research also found with industry and government support measures in place, including a moratorium on court possession proceedings, the third quarter saw static arrears and minimal possessions and this is set to continue during the fourth.
Further demand for lender support is anticipated to increase next year as employment and incomes come under strain.