The number of mortgage approvals for house purchase slumped to 9,300 in May, almost 90% below February’s level and around a third of their trough during the financial crisis in 2008, new Bank of England (BoE) data has revealed.

The Bank’s latest monthly Money and Credit statistical release indicated the mortgage market had “remained weak” in May, compared to levels seen before COVID-19.

Approvals for remortgage – which include remortgaging with a different lender only – have also fallen, to 30,400, although the BoE said this fall was a little less sharp and was 42% lower than in February.

The BoE’s data also revealed that consumer credit borrowing in UK households remained “lower than usual” in May, as COVID-19 continued weighing on spending. On net, the data showed that people repaid £4.6bn of consumer credit in May following repayments of £7.4bn in April and £3.8bn in March.

The figures indicated that there were repayments on both credit card lending (£1.8bn) and other forms of consumer credit (£2.8bn).

Responding to the figures, Bluestone Mortgages managing director, Steve Seal, commented: “Gross mortgage lending is set to remain low for a while yet. Whilst last month’s housing market news will help to boost consumer sentiment in the short-term, the long-term picture will be very different.
 
“Advisers will continue to play a crucial role here. But in order to ensure they are able to direct borrowers to a financial solution that best aligns with their circumstances, they will need the support of lenders. The specialist market in particular is key.”

Landbay CEO, John Goodall, said: “It will be more challenging for many people to get mortgages, however, particularly if they have been furloughed or lost their jobs. This is reflected in the dire situation where mortgage approvals were only a tenth of what they were in February.

“What this does mean is that the demand for private rental property is likely to increase as the year progresses. Those who would ordinarily have bought a property may well be struggling to do so and we have already seen demand from landlords increase sharply in the last month.”

Phoebus Software sales and marketing director, Richard Pike, added: “When you consider the fact that there were already mortgages in the pipeline before the lockdown in March, you can see that many of the approvals in May were due to lenders flicking the switch and starting the approval process again. However, when we look forward the figures in the coming months will not only reflect the market shutdown, but also an element of caution as people consider their long-term finances.
 
“As things get back to some sort of normality there will undoubtedly be calls for a stamp duty cut to give the market the boost it needs. However, with the Treasury’s coffers severely depleted that is highly unlikely.”

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