Will a new year begin to write some of the wrongs of the previous one?

It’s fair to say that, if you take the year as a whole, the mortgage and housing market was remarkably resilient benefiting from that post-lockdown demand and the stamp duty holiday which was available to additional property owners in a way previous holidays had never been.

Certainly, purchase activity rose dramatically throughout the year as a result, although there were still issues for a significant number of borrower demographics, not least first-time buyers, those seeking high LTV mortgages, and the self-employed.

One wonders if a new year will begin to write some of the wrongs of the previous year, and the news in certain areas is already more positive. A growing number of lenders are returning to 90% LTV lending and reducing rates, and the Help to Buy scheme, whilst purely for first-timers from April this year, still has two years to run. However, I’m not sure there has been any significant changes for the self-employed. The market is much more difficult for them now than it ever was pre-March last year.

But what about more general views on the market? Is the anticipation among our industry trade bodies, for example, that we can have a growth market in 2021 or will that stamp duty holiday deadline be the cliff-edge moment for the housing market that a number of commentators fear it to be.

If purchasing has been brought forward, will there be enough juice in the remortgage and product transfer sectors to make up for it? Or are we looking at a year when, given everything we have gone through, it will be more about stabilisation than off the charts growth?

In that respect, the IMLA paper, ‘The new ‘normal’ – prospects for 2021 and 2022’, is an interesting read given that it offers a particularly bullish assessment of the overall mortgage market this year and next. Indeed, as others have already pointed out, when it comes to their predictions for 2021 gross mortgage lending, there is a real distinction between IMLA and UK Finance.

The former suggests gross lending will hit £283bn this year while the latter opts for a much more conservative estimate of £215bn. Normally, and given the membership make-up, you would expect a much more aligned view to be taken – I’m not sure you can say a £68bn differential counts as this.

So, who to believe? Predictions are, after all, just that although one knows full well that each organisation will have surveyed its membership on what they had planned for the year ahead. How have targets changed from this year to last?

Talk to a lot of lenders and they are likely to tell you that 2020 turned out to be a good year for them, even with the two-month closure of the housing market from March through May. Based on that, I gather targets have gone up at many lenders and so how – given that UK Finance estimate 2020 gross lending to be in the region of £233bn – do you account for UK Finance’s estimate of £215bn this year and £230bn next?

Just to point out that IMLA suggest 2021 will hit £283bn and this will increase again in 2022 by a more modest £3bn to £286bn. Bear in mind that the organisations also disagree on their estimated gross lending figures for this year, with IMLA suggesting it will be £241.6bn. Perhaps when you’re working from different points of what actually happened in 2020, you were always going to diverge in terms of what might come next.

But where does the truth lie? Given those increased lending targets, I am inclined to move more towards IMLA’s figures (perhaps £260bn) , however there is plenty of uncertainty – specifically with Covid, challenges in the wider economy and that stamp duty change – to feel this year will be a much quieter one. Lenders therefore may have to go some, and return to sectors they have migrated from, in order to make those numbers. By this I mean more lenders offering products at 90% LTV and indeed a return to 95% LTV lending.

That would be a real positive for first-timers especially those who have a 5% deposit and no access to parental or family support. Especially when the latest Moneyfacts data shows there are now only five products available at 95% LTV when there were 386 last January; similarly 10% deposit products have fallen to just 221, a third of what they were this time last year.

We need the industry to recognise that these borrowers are not the higher-risk they necessarily think they are, that the market has been founded on getting people onto the ladder with low deposits, and that this will help the entire market in terms of maintaining transaction levels and ultimately lending volumes. You only have to go back 10 years to realise that if the market limits supply at high LTV then ultimately the whole market slows down.

Overall, it is very early days, but I don’t rule out a situation where a relatively quiet couple of months for new business results in either lenders re-evaluating their targets, or feeling the need to, for example, return even more aggressively to high LTV lending and other sectors where they feel volumes could be achieved.