The number of mortgages approved by lenders in the final quarter of last year hit the highest level for 13 years, the latest figures from UK Finance show.

Residential property purchase lending was highest in December, up 31% compared with the same month in 2019.

But overall mortgage lending was lower in 2020 than in 2019 owed primarily to the sharp drop in lending during the first lockdown in Q2 as pandemic restrictions took hold.

However, mortgage lending last year was still higher than expected due to strong levels of activity in Q4.

Eric Leenders, managing director of personal finance at UK Finance, said: “Homebuyers looking to take advantage of the stamp duty holiday were behind the housing market’s strongest quarter for purchases in 13 years, in the final quarter of 2020. Despite this uptick in activity, annual purchases for the whole year were around a tenth lower than the previous year, due to a complete shutdown of the market in the first lockdown.

“The stamp duty holiday helped to boost activity at the end of 2020, and it is likely many of these purchases have been brought forward in order to take advantage of the savings. The chancellor’s announcement in the Budget to extend the stamp duty holiday until the end of June before then phasing it out will prevent a cliff edge, reducing the risk of house sales collapsing and will prove beneficial for all parties involved in the housing market.”

The stamp duty holiday, which was due to expire in March, clearly sparked a flurry of homebuying activity, according to Richard Pike, sales and marketing director at Phoebus Software.

He commented: “The stamp duty holiday obviously did as it was intended, stimulating the market in difficult circumstances. It has also created increased demand in a market where there isn’t enough property to meet that demand, which in turn is pushing prices up across the country.

“With many transactions in the pipeline the extension to the SDLT holiday, announced in the Budget yesterday, will go some way to ensuring that more of these complete before the new deadline. Whilst the mortgage guarantee scheme and extended nil band rate to £250,000 will help buyers struggling to raise large deposits, the increase in remortgages to release capital to help family members with deposits is telling. It will be interesting to see if this trend continues now that 95% mortgages are back on the table.

“The encouraging thing from the Chancellor’s speech yesterday was that, according to the OBR, recovery from the pandemic is ‘set to be swifter and more sustained than forecast’. Let’s hope that this is indeed the case. We still need to consider the increase in arrears cases in both the mortgage and rental sectors and how lenders will deal with these as we move forward.”