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Mortgage approvals slump to record low - Bank of England

By Abigail Townsend

Date: Tuesday 02 Jun 2020

Mortgage approvals slump to record low - Bank of England

(Sharecast News) - Mortgage approvals tumbled to a near 30-year low in April as the Covid-19 pandemic and lockdown measures brought the UK property market to a halt, official data showed on Tuesday.
According to the Bank of England, the number of mortgage approvals for house purchase was 15,800 in April, down on March's figure of 56,100 and around 80% lower than February.

It is the lowest level since the series began in 1993, and around half the number of approvals seen during the trough of the 2008/09 financial crisis.

Analysts had been expecting a fall, but most had pencilled in a less severe decline, with consensus for around 24,000 mortgage approvals.

Gross new mortgage borrowing fell to £14.4bn, a 38% slide on February, while repayments on mortgage lending declined 26% to £13.9bn.

"This reflects a sharp fall in repayments of loans, as well as the effect of payment holidays," the Bank said. "The sharper fall in gross lending than repayments means that net mortgage borrowing fell, and was only £0.3bn in April, compared to an increase of £4.3bn in February." It is the lowest net increase since December 2011.

Consumer credit also took a hit, as households reduced the amount they borrowed. New gross borrowing was £11.8bn in April, around 50% down on February. Repayments also fell sharply, by 19% since February, which was attributed to repayment holidays.

However, on a net basis, the larger fall in gross borrowing meant people repaid £7.4bn of consumer credit in April, double the repayment in March and the biggest on record.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "Households accumulated cash in April: their broad money holdings increased by a record £16.2bn, as government schemes supported incomes but consumers spent less during the lockdown.

"Spending and borrowing naturally will rebound in June, when all non-essential shops will reopen, but we doubt that households will spend the cash they have accumulated during the lockdown soon, given heightened job insecurity and lingering concerns about catching the virus.

"Mortgage approvals likely will snap back too, now that in-person property viewings are allowed. But with mortgage rates having falling only marginally so far this year, unemployment set to rise and banks intending to restrict the supply of secured credit, we expect mortgage lending to remain at last 10% below its pre-virus peak in the second half of this year."

The Bank of England also said that UK private sector businesses raised a total of £16.3bn from banks and financial markets during April, down on the £31.6bn raised in March. Within this, companies repaid £1.0bn of bank loans.


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