The effective closure of the property market between March and May left the number of mortgage approvals at 90% below their pre-lockdown levels last month, Bank of England data shows.
Unsurprising statistics from the Bank of England show there were just 9,300 approvals for house purchase during May – a record low – while the number of remortgages was 42% lower at 30,400.
This slump was as expected due to restrictions on viewings and banks reducing staff and focusing on mortgage repayment holidays rather than new lending in recent months.
Andrew Montlake, managing director of mortgage broker Coreco, said: “A 90% drop-off in mortgage approvals for house purchase in May is a jaw-dropping but thoroughly understandable number given the extraordinary events of the second quarter.
“Along with the fact that many lenders were operating at reduced staff levels and demand had almost evaporated during the dark month of April, the property market only opened up again in the second half of May, which will have further weakened the number of approvals.”
Montlake added that there has been a pick-up in demand from borrowers so far this month.
He said: “We remain for now in an artificial environment created by the Government’s furlough scheme. When this is slowly withdrawn, we will see the full impact on confidence, among borrowers and lenders alike.
“Amid the radical uncertainty, there are still so many reasons why people want to buy, whether that’s to move to the country to be better placed for a potential second wave, grow a family, move to a school catchment area or marital breakups.
“Along with the ongoing supply deficit, there remain certain fundamental supports for the property and mortgage markets despite the uncertain environment.”
David Ross, managing director of property software company Hometrack, echoed this.
He said: “Our data for June shows continued growth and is up on the same period in 2019.
“Continued stimulus is key to maintaining this growth.
“We urge mortgage providers to focus on delivering the very best customer experience, removing complexity through digitisation and ensuring fewer barriers to borrowing.
“This in turn will help grow new lending, helping the economy get back on its feet after the shock of Covid-19.”
Paul Stockwell, chief commercial officer at Gatehouse Bank, added: “The number of mortgage approvals in May is roughly a third of what they were during the worst of the financial crisis, which really puts the pandemic’s impact on the economy into perspective.
“The property portals are reporting strong demand since the market re-opened in mid-May. However, time will tell whether the pent up demand will come to fruition.
“June will be the first full month of property transactions since the UK went into lockdown and it will be these figures that will be hotly watched as a measure of how determined buyers and vendors who returned to the market have been.”