UK Finance said the main driver of lending in 2021 was for house purchases at £200bn, up 53% on 2020.
UK Finance has predicted that buy-to-let (BTL) purchase activity will have increased to £18bn this year, up 83% on 2020.
UK Finance said the main driver of lending in 2021 was for house purchases at £200bn, up 53% on 2020; however, homeowner remortgaging activity was slightly down on last year at £62bn.
The predictions outlined that total house purchase transactions, including cash purchases, will reach 1.5 million in 2021, some 47% higher than 2020, and the highest number since before the Global Financial Crisis.
UK Finance estimated that gross lending overall would peak at £316bn, up 31% on 2020, then moderate to £281bn in 2022, before increasing again to £313bn in 2023.
Looking ahead, UK Finance said that while the 2022 and 2023 gross lending figures will be reductions on the 2021 peak, they will be higher than the 2020 and 2019 figures, representing a return to more stable levels of activity.
James Tatch, principal, data and research at UK Finance, said: "2021 has been a bumper year for mortgage lending amid the stamp duty holiday and homeworkers moving from cities.
"The outlook for the housing and mortgage markets over the next two years is for a return to more stable, balanced picture following the upheavals of the last two years.
"While risks remain, both to new lending and ongoing affordability, the market looks to be emerging from the pandemic in a better place than previously anticipated, supported by a much-improved wider economic outlook."
Elise Coole, managing director of Keystone Property Finance, added: “It has been an enormously busy year for the buy-to-let market, with pent-up demand from the pandemic and the end of the stamp duty causing a spike in activity.
“UK Finance has predicted a significant slowing of purchase volumes in the buy-to-let sector next year, but this is not surprising given how pumped up the market was by artificial stimuli this year.
“What’s important though, is that UK Finance expects another strong year of lending next year, both for purchase and remortgage, with remortgage activity being driven by the tax changes introduced by George Osborne when he was Chancellor.”