UK mortgage approvals fall 90% to record low in May as coronavirus hits housing market
New mortgage approvals collapsed by 90% compared to pre-pandemic levels and represent just a third of the lowest level seen during the 2008 financial crisis.
Lenders approved just 9,300 mortgages for home purchases in May, down 90 per cent on February’s total and just a third of the trough experienced after the financial crash in 2008.This is the lowest level since comparable records began (in 1997), according to data from the Bank of England.
Approvals for remortgage have also fallen, to 30,400, over 40% lower than in February.
Analysts warned that a “two-tier” mortgage market has emerged, with banks and building societies willing to lend to homeowners with large deposits but freezing out first-time buyers.
Lenders have withdrawn many of their highest loan-to-value deals in recent weeks.
UK house prices are set to fall five per cent this year and will not recover until the end of 2022, according to analysts polled by Reuters. In its worst-case scenario, prices would fall 11 per cent this year.
The Bank of England also found that people are continuing to cut their credit card borrowings during the pandemic. On net, people repaid £4.6 billion of consumer credit in May following repayments of £7.4 billion in April and £3.8 billion in March.
The extremely weak net flows of consumer credit meant that the annual growth rate was -3.0%, the weakest since the series began in 1994.
That’s partly due to many shops still being closed last month, and partly due to people saving more money under lockdown.
Posted on Jun 29, 2020.