The firm warned of a possible surge in repossessions and distressed sales when 2.9 million mortgage payment holidays granted by lenders in response to the pandemic end on 31 July.

Home.co.uk director, Doug Shephard, described the scheme to protect borrowers as having seen the housing market become “essentially disconnected from the economic woes of the coronavirus pandemic.”

He said that although lenders were in some cases offering ongoing tailored forbearance, questions remained as to how many borrowers who took payment holidays would get back on track with repayments.

The scheme gave borrowers the option to take up to six months’ worth of payment holidays from March 2020 to 31 July 2021.

Shephard noted that while the size of the upcoming surge was hard to estimate, it might well be enough “to radically affect the balance of supply and demand. Be warned,” he said.

The caution came as Home.co.uk published its Asking Price Index showing stock of property for sale in England and Wales hit a new low of 273,531 in June. The dearth of supply had supported price growth of 8% annually to an average £340,678.

The Financial Conduct Authority reported in April that 19% of the top six lenders’ mortgage customers had deferred payments. That proportion rises to 28% among non-bank lenders.

Shephard said: “It is clear that mortgage forbearance and the furlough scheme have essentially disconnected the housing market from the economic woes of the pandemic. Rising house prices have also insulated mortgagees from financial distress as they see their equity rise in value.

“At some point, however, the music may stop and lenders will need to recover their bad debts, leading to a surge in repossessions and distressed sales,” he added.