Mortgage lending was flat in the first three months of 2020 compared with a year ago, while an increase in buy-to-let (BTL) activity was offset by a drop in first-time buyers, new UK Finance data for the first quarter has revealed.

Figures suggested regional variations in activity are a likely reflection of the market disruption due to the coronavirus pandemic, and the trade body also suggested that despite cuts to the bank base rate, it is expecting household preferences for fixed rate mortgages to continue.

UK Finance said that its first Household Finance Review published since the onset of the COVID-19 pandemic captured the “very early signs” of the impact on household finance activity, immediately before and after the introduction of lockdown restrictions on 23 March 2020.

The report also indicated there was a modest pick-up in arrears towards the end of the quarter as the COVID-19 pandemic began to impact homeowners, although this still left the number of mortgages in arrears lower than a year ago.

Commenting on UK Finance’s latest data, Phoebus Software sales and marketing director, Richard Pike, said: “We can now see exactly how the first quarter of the year panned out and how the coronavirus lockdown had an almost immediate affect on the housing market.

“It is interesting though to see that the first-time-buyer market had been declining across most of the country even before the crisis. This could be a trend that continues, at least until house builders get back to full capacity and new build properties start to become available again.”

Landbay CEO, John Goodall, suggested the BTL market had started the year “really strongly” and that January and February had seen strong demand for new purchases.

“UK Finance shows a 7% year-on-year increase, but what we saw was significantly in excess of that,” he commented.

“While the coronavirus lockdown from mid-March has hampered this, there is still a notable demand from landlords and investors. What these figures don’t show is the effect of payment holidays. While there is demand, borrowers who are trying to take out new mortgages whilst also taking payment holidays on existing parts of their portfolio may find it harder to buy than they did before. 
 
“While there is no chance that we will jump straight back to the numbers we saw at the start of the year, as soon as confidence returns the market should also return to normal, although I don’t expect a ‘V’ shaped recovery, but a longer, more gradual increase.”

more2life CEO, Dave Harris, added: “While today’s figures show a promising start to the year, the coronavirus outbreak has drastically changed the look and feel of the mortgage market. Nonetheless, the industry has worked hard to ensure it can continue to help customers and keep the market moving – in particular the equity release market.
 
“The cooperation between lenders, advisers, suppliers and trade bodies in the later life lending sector has meant that over-55s, including those who have been impacted by the coronavirus outbreak, have been able to continue accessing the funding if they need it.

“Over the coming weeks and months, equity release as well as other later life lending options will be a huge support to many older customers who may have found their careers curtailed or their pension savings hit.”

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