As would be expected by many people, the number of new home loans approved in Great Britain has decreased by 90% since the outbreak of the COVID-19 pandemic. The Bank of England states this is the lowest level since the early 1990s.
Even though estate agents have been operating in the property market since mid-May, there was a fall in the number of mortgage approvals. There were 15,900 mortgage approvals in April, and this fell to 9,300 for May 2020.
A new low since records began
The market predicted a total of 25,000 new home loans for May, but the actual number of loans fell short of that number. This was the lowest number of loans approved since the Bank of England series started in 1993. At the beginning of 2020, over 70,000 new loans were being approved on a monthly basis.
While analysts have been found wrong in what they expected to happen for this month, many industry experts say the depressed state of the market shouldn’t be a surprise. There have been numerous reasons cited for this lack of activity including limited property viewings throughout May and a delay in home loans being approved.
Hansen Lu is a Property Analyst at Capital Economics who has spoken about these figures, saying; “The latest fall isn’t a sign that the market is struggling to recover. Rather, it probably reflects the gap in the sales pipeline, from when the market was closed between March and May. With households confined to their homes, there would have been far fewer sales than usual moving to the mortgage approval stage in May. Also, many buyers with half-completed sales have been renegotiating on price, which also points to a delay in the sales pipeline.”
There are hopes the market will recover soon
Lu also believed lending will improve in June, related to the level of demand for property and agreed sales in the UK housing market.
Mark Harris is the Chief executive of SPF Private Clients, and he said; “Covid-19 has had a devastating impact on the mortgage and property markets, so it is no surprise that lending was weak in May, with approvals for house purchase falling. With lockdown meaning that lenders were unable to send valuers out to physically view properties, the number of mortgages approved fell considerably.”
Information provided by the Bank of England indicates consumers continued to pay off their debt in May. This is a clear indication the COVID-19 pandemic has led many households to take a cautious approach to their finances.
A total of £4.6bn of consumer credit was repaid in May, which follows on from £7.4bn worth of payments in April and £3.8bn worth of payments in March. Credit card lending payments totalled £1.8bn and overdraft spending amounted to £2.8bn.
Anyone looking for guidance in the mortgage market, or who wants to minimise the time it takes to find their best option, should speak with a trusted adviser. Arranging a chat with a professional is the starting point in finding a mortgage which is suitable for your current needs.