Pent-up demand and government incentives jolted the UK’s property market back to life this summer despite caution from lenders about the effects of Covid-19, according to a new Experian report.

Experian’s research in Lending with Confidence: A data-led Analysis of the Mortgage Market has revealed that mortgage applications increased year-on-year by 13% in July, followed by rises of 25% in both August and September.

Experian data suggests 1.2 million mortgages will be agreed at a value of £216 billion this year. However, the pause in the market caused by the lockdown means lending is still likely to be down on 2019’s £250 billion across 1.5 million loans.

The surge in mortgage applications has come at a time when lenders face considerable challenges in ensuring the loans they offer are affordable for borrowers in the long-term.

About 1.9 million mortgage accounts are currently subject to an Emergency Payment Holiday (EPH). These mortgage accounts have an average balance of £150,000, 30% higher than the £114,000 owed by those who have not paused repayments.

Circumstances for people on payment holidays also differ significantly, with only half of those on an EPH seeing their disposable income decrease during the pandemic. 25% of people on payment holidays have experienced an increase in disposable income as they have cut back spending elsewhere. It suggests people in this group anticipate their income may change in the future, so have taken the chance to build resilience.

Lisa Fretwell, Managing Director of Data Services at Experian, said “People moving home is good news for the economy, as activity in the property market fuels growth in related services. Tax incentives and an extended period indoors have encouraged people to make a move this summer, as our analysis shows.”

“Most moves require a mortgage and, while lenders want to extend new loans, they have a responsibility to ensure homebuyers are only taking on what they can afford in the long-term.”

“Covid-19 has complicated the financial situation for millions of people, and the challenge for lenders to understand each applicant’s circumstances has become more difficult as a result. Both traditional and new data sources will help lenders to make the highest quality decisions to keep Britain moving.”