Private Finance comments on Bank of England’s Mortgage Lenders and Administrators Statistics – 2020 Q1

09 June 2020

Shaun Church, Director at mortgage broker Private Finance said: “These figures show the initial signs of the impact the lockdown had on lending activity, with the value of new mortgage approvals dipping slightly over the last quarter. However, as lockdown extended into April and beyond, Q2’s figures are likely to expose the real impact the coronavirus crisis had on lenders’ risk appetite, as they scrambled to de-risk their portfolios by reining in lending.

“Sharp reductions in businesses’ revenues driven by industry shutdowns intensified job insecurity concerns in the economy. This contributed to lenders temporality tightening their underwriting procedures to offset the lack of certainty large proportions of their lending base had over their future financial position.

“Next quarter’s figures are likely to show a significant reduction in borrowing costs as providers adjust to the Bank of England’s rate cut in March and lower rates across their suite of products.

“A reduction in average rates will support the property market’s recovery as it emerges from lockdown. In recent weeks, we have experienced an uptick in enquiries, suggesting the market’s bounce back is underway, driven by a swift release of pent-up demand.

“Lenders’ appetite for risk has increased over the last two months. Many are returning to the higher LTV market, for instance. This will widen the consumer base for sellers and help stimulate a swift recovery in the housing market. As lenders gradually ease their credit controls, buyers may be encouraged to resume their property searches and push on with purchases, while higher LTVs may attract first time buyers and buy-to-let investors to the market again.”