Comments from Private Finance on the Bank of England’s Money and Credit and Effective Interest Rates data for March

04 May 2020

Shaun Church, Director at mortgage broker Private Finance, said:

“Greater political stability and certainty around Brexit helped to increase lending appetite at the start of the year, prompting buyers to push ahead with home purchases. But while mortgage approvals jumped at the beginning of 2020, fuelled by New Year optimism and low interest rates, March’s figures clearly show the initial impact of the pandemic on confidence in the market. It’s a sign of the times that April’s levels are likely to fall even further as people focus on health first and foremost before house purchases, and lenders adjust to the coronavirus crisis.

“The crucial question is: what will lending appetite look like as the lockdown starts to lift? How far mortgage providers are willing and able to lend to a population facing increased financial strain remains to be seen. However, it’s a testament to a robust market that average rates on two-year fixed mortgages were actually lower at the end of March than they were a year earlier, except for borrowers with a 5% deposit.*

“Both buyers and lenders will want to proceed with caution, but there may be better news on the horizon amid the uncertainty. After the initial shock of two Bank rate cuts and widespread requests for mortgage repayment holidays, lenders have been returning to the market in recent weeks by offering higher LTVs at lower rates. If restrictions on movement can be safely lifted, a degree of confidence should return and encourage more people to revisit home purchase plans they put on ice.

“Low rates will also prompt people to look at remortgaging, which is less restricted by social distancing and can stimulate a market rebound. However, long-term recovery will rely on banks, building societies and specialist lenders continuing to maintain low rates across a variety of LTV products to ensure all market segments are properly supported.”