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Mortgage approvals slump by a fifth as early coronavirus impact revealed – BoE

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  • 01/05/2020
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The first impacts of the coronavirus on the mortgage market are beginning to show as approvals slumped to their lowest level in five years in March.

 

Unsurprisingly, given the government restrictions, the purchase market was particularly hard hit with approvals for purchases falling to their lowest levels since 2013.

According to the latest Bank of England data, and one of the first reports to be issued including the start of the coronavirus impact, in March there were a total of 110,964 mortgages approved.

This was the lowest total since March 2015 when 107,043 approvals were granted, and was down 21 per cent from 141,153 in February 2020 and down 12 per cent from 126,315 in March 2019.

For purchase approvals the falls were even more substantial – the 56,161 total was down 24 per cent from last month, down 14 per cent from March last year, and was the lowest since March 2013.

Remortgage approvals were also down 20 per cent on February and were at the lowest levels since August 2016.

 

Lending value sinks

Correspondingly, the value of mortgages approved in March also fell to £19.6bn from £25.2bn in February and £21.5bn in March 2019.

Instead of building on a rebound in lending which had grown steadily from October, the market has been cut down to levels last seen in September 2016.

Of slight encouragement is the value of lending released in March, which was fairly steady at £22.6bn – down slightly from the previous month but up on March 2019.

However, most lending completions come through several weeks after approvals, suggesting this figure will likely fall in the coming months.

The bank also highlighted that the rate on new variable-rate mortgage borrowing fell by 17 basis points in March, while the cost of fixed-rate mortgages was little changed.

This was despite it making two combined cuts of 65 basis points during the month.

 

Deals not being cancelled

North London estate agent Jeremy Leaf noted that the data echoed the experience on the ground.

“This is one of the first housing market surveys to show the impact of coronavirus on the market as it confirms a sharp fall in mortgage approvals, which we also noticed almost instantly,” he said.

“This report is always a useful lead indicator of what is about to come in the market and it is on the money this time.

“The only good news is that it seems most deals have not been cancelled or withdrawn unless the buyer is employed in an industry particularly badly affected by the pandemic.

“Most seem to be prepared to proceed hopefully sooner rather than later when restrictions are eased and surveyors can start to revisit properties again,” he added.

 

Caution in the market

Phoebus Software sales and marketing director Richard Pike echoed these sentiments, adding that it was particularly disappointing after the strong start to the year.

“As we can see from the March figures, the effect of the coronavirus outbreak started to be felt almost as soon as the lockdown was implemented,” he said.

“Despite the fact that many of the housing transactions, being reported in these figures, were in the pipeline up to three months earlier, it is evident that the lockdown caused some to be stalled.

“The hope is that the transactions that are waiting in the wings will be completed once the crisis is over, but we have to be prepared for some to fall by the wayside.

“We are likely to see an element of caution creep back into the market and fears over affordability, with many people seeing a real knock to their finances, cannot be ignored.”

He added that news of brokers reporting an increase in new-build enquiries perhaps suggested there was some confidence returning to the market.

 

 

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