The Bank of England had published its latest banking statistics which have indicated that mortgage approvals for house purchase fell to 56,200, their lowest level since March 2013.
House purchase decreased by 24 per cent from almost 74,000 in February, hitting their lowest level for seven years.
The Bank of England data shows that while purchase approvals have not fallen to this level since 2013, remortgaging was also down by 20 per cent to 42,551, the lowest figure since 2016.
With other indices still reflecting pre-pandemic activity, the latest figures from the Bank of England are the first major sign of the impact of the lockdown on the housing market. 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.
Separate figures revealed that households repaid £3.8 billion of consumer credit in March. In addition, credit card spending was down by 0.3%, compared to the previous year.
Commenting on the figures, Will North, Director of core credit at TransUnion said “The Bank of England’s most recent statistics on Money and Credit highlight the turmoil brought about by COVID-19. Mortgage approvals for buying a house were at their lowest level since March 2013. Borrowing was at an all-time high of £55.3 billion, although this does not reflect the decline in applications seen in the latter half of the month, which we’ll see in April’s figures. Gross lending was £5.4 billion weaker than in February, while repayments were £1.3 billion lower.”
“Due to the weak net flows of consumer credit, the annual growth rate fell to 3.7% in March – the lowest since June 2013. For credit card lending, the annual growth rate dropped to -0.3%, the lowest figure recorded, whilst for other loans and advances, the annual growth rate fell to 5.6%.”
“This picture is not unexpected. Here at TransUnion we’ve been tracking the impact of the pandemic on consumer credit and have found that three out of five UK households have been negatively impacted by COVID-19; a figure that has remained largely unchanged since our study commenced on 23 March. Of those impacted, two thirds (67%) are worried about paying bills; with utilities, rent and credit cards topping the list, in that order. In this environment, it’s unsurprising that house purchases are no longer a priority as consumers adapt to an unprecedented economic shock.”
Millennials (those born between 1980 and 1994) appear to be feeling the financial stress more than most and this is not specific to the UK. Our global survey, which spanned seven regions of five continents, found that that three in four millennials (76%) worldwide indicated their household incomes have been negatively impacted by the pandemic. This compares to 64% for all other generations. ”
“So what lies ahead, given such levels of uncertainty? As we wait for news on when and how the lockdown will end, we’re told that the UK has now passed the peak of the infection. Will that also be true for the financial shock? The April figures will provide more insight into the impact but the repercussions will reverberate well beyond. ”
“There are positive indications, however, that the financial relief measures offered by the government and finance providers to ease the burden are working – at least for the short-term – whilst our research highlights the resilience of consumers as they put plans in place to address their changing circumstances. Looking at the longer-term picture, lenders need to engage with their customers to support them through this time, as we all work together to navigate our way through this challenging period.”
Craig McKinlay, New Business Director at Kensington Mortgages, said “Just when we were starting to see the market hit record highs, today’s results confirm the detrimental effect of the impact of covid-19 is having on the UK housing market, with activity dropping over 20% and hitting a seven year low.”
“With physical valuations unable to take place, the housing market, in effect, has been halted for now. But it is slowly starting to return to normal as lenders re-enter the high loan to value market along with the help of automated valuation models (AVMs). Next month’s results may look even more dismal, however like previous dips, the market will pull through.”
“Government support to help the housing market get back to ‘normality’ sooner rather than later will very likely be needed though. A stamp duty freeze would be one way of doing this – offering much-needed tax relief for those who need it and less financial pressure on potential buyers. Things will eventually get better, but for now, we need to think of short term measures to help get the market moving again.”
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