Its Household Finance Review, which illustrates how the lockdown impacted mortgages during the property market closure, also identified a steep fall in the number of people using payment deferrals at the end of June.

Indeed, UK Finance said when the first wave of ‘mortgage holidays’ ended in June fewer than one million customers were taking advantage of the support compared with 1.8 million at the peak in early June.

But it was the number of purchases on which the closure had the most impact – indeed UK Finance reported “the effect of lockdown was immediate and dramatic”.

After the first quarter, when the rate of growth had effectively flat-lined, lending suddenly went on a sharp decline with house purchases experiencing a 48% drop in Q2.

UK Finance said volumes in April were less than half those experienced the year before. This contraction was similar in May, although it eased in June following the re-opening of the housing market.

Homemover numbers plummeted by 61% annually in April, compared to 53% for first-time buyers 54% for buy-to-let-purchases.

UK Finance suggested this was because the logistics were more challenging than for first-time buyers and buy-to-let investors because movers needed to sell and buy.

Remortgaging

When it came to refinancing there was a 4% year-year-on year fall which was far less dramatic than the drop experienced in the house purchase market.

Product transfers (PTs), meanwhile, actually increased by 2% during Q2.

UK Finance said a huge influence on this increase was the fact many refinancing transactions could be carried out entirely via online or other remote channels with no need for face-to-face interactions. This made them well-suited to lockdown conditions.

In Q2 PTs accounted for 77% of all refinances, up from 72% in Q1, helped by the industry pledge to ensure PTs were offered to all those on payment deferrals or furlough.

‘Radical’ reduction in activity

Eric Leenders, managing director, personal finance, at UK Finance, said:  “The economic and logistical impacts of lockdown in the second quarter of 2020, restricting the ability of households to buy or move house, brought about a radical reduction in activity in the mortgage market and shifted refinancing further towards internal product transfers.

“These impacts are now receding and we are beginning to see some recovery in the housing market.”

He added: “Many borrowers have been supported through the pandemic with temporary payment deferrals and – looking forward to the third quarter of 2020 – it is encouraging to note that a significant number of customers are now able to resume repayments.

“Although economic activity is beginning to recover, the outlook in the jobs market suggests that customers will still need support and lenders stand ready to help as required.”

Industry reaction

Jeremy Leaf, north London estate agent and a former RICS residential chairman, said the figures offered a good summary of what’s been happening over the last few months and where the market is heading.

“In other words,” he explained “purchase lending plummeting followed by strong recovery.”

He added: “The improvement in mortgage approvals in particular points the way to a more sustained recovery despite poor economic and employment news on the way, which will not be helpful for first-time buyers in particular.”

Meanwhile, Richard Pike, Phoebus Software sales and marketing director, said there were no real surprises in the report.

“It hit our sector hard,” he said, “and so too the finances of homeowners across the country.  With the recent rebound in the housing market it’s now time to look to the future.

“The stamp duty holiday is obviously having the effect that the government intended, but other factors are at play.

“Rising house prices mean rising deposits and a definite need for higher LTVs.  Although higher LTV lending is still taking place, deposits are being supported by family assistance much more and this is playing a huge role in getting people onto the property ladder.

“This could mean a further increase in equity release lending in the coming months.

“The clock is ticking and for people to take advantage of the stamp duty holiday – they do need to move fast in this seller’s market”