UK mortgage approval rates have plummeted, according to the latest figures published by the Bank of England. Revealed figures show the lowest approval figures since this type of mortgage approval record started in 1993, with approval levels down nearly 90% from February’s pre-pandemic levels and down to just 9,300 approvals in May from 15,800 in April.
The last drop is perhaps the most worrying of the two: while mortgage approval rates would always drop purely because the real estate market was largely inactive compared to February; the fact that mortgage approvals were lower in May, when the real estate market reopened, indicates that the figures are not only distorted by the blockade.
These figures are quite extraordinary: mortgage approvals in May 2020 were a third than they were in the worst period of the 2008 financial crisis. This is an unprecedented situation for an entire generation of potential and current homeowners.
It’s not just first-time buyers who aren’t approved; The approval level of remortgage has also fallen by more than 40% since February. This confirms the suspicions of some economists and real estate experts that creditors are holding back mortgages for fear of a collapse in the real estate market over the year, which in turn is causing potential buyers to take a “hold” approach. and see “and withhold purchases.
The real estate market is in a stuck position: on the one hand, the caution of both lenders and buyers is understandable – we still don’t know how profound the economic impact of Covid-19 will be. Reliable indicators of employment levels and the extent of the reduction in profits will only be seen in the autumn, after the end of the government’s retention of employment scheme in October.
“Short / medium-term mortgage lenders will begin to request larger deposits and shift the parameters of their stress tests / economic accessibility calculations – this combined with current job losses and income uncertainty will undoubtedly lead many buyers out of business, “Ross Counsell, statutory expert and director at Good Move told the Guardian yesterday.
If mortgage approval rates remain at historically low levels, the collapse in house prices that lenders fear is almost guaranteed by the end of the year and will not drop to unemployment levels.
However, Ross Counsell also adds to the Guardian that “in the long run we expect to see a surge in the real estate market across the UK along with an increase in mortgage and mortgage approvals. However, it is important to note that this is deeply dependent on the ongoing government plans to support people’s jobs and household income. “
Mark Harris, the CEO of the mortgage broker SPF Private Clients, even yesterday speaking with the Guardian was more optimistic: ‘… the lenders remain eager to lend and shower money to do so. With the backlog of ratings now making it clear that surveyors can once again make assessments, we expect mortgage approvals to grow. Mortgage rates remain extremely competitive and lenders are slowly returning to higher loan values, which is good news especially for newbies. “
So, it’s a mixed picture, with mixed opinions about what’s going to happen. Our best advice: if you are a first time buyer or are looking for a remortgage, you should evaluate your options until you know if your job is safe, for example if you are aware. This should be the main indicator for you whether or not you should take out a mortgage.
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