The figures revealed this area of lending, where loans are agreed to be advanced in the coming months, dropped to £34.3 billion – 53.2% lower than the same time a year earlier – when the UK was in lockdown and at the height of the pandemic.
This is the lowest it has plunged since the beginning of 2010, according to the latest BoE Mortgage Lenders and Administrators Return (MLAR).
The value of gross mortgage advances during Q2 was at £44.1 billion – which is a third lower (33.3%) than in 2019. What’s more the value of outstanding mortgages with some arrears increased by 2.8% over the quarter to £14.1 billion. It now accounts for 0.93% of outstanding mortgage balances.
At the same time the share of gross mortgage lending for buy-to-lets was 14.4% which was a 1.2pp increase from Q2 in 2019.
Jonathan Harris, managing director of mortgage broker Forensic Property Finance, said: “The impact of the pandemic comes through loud and clear in these figures from the Bank of England with the value of new mortgage commitments dropping dramatically in the second quarter.
“These were 53.2 per cent lower than the same period the previous year, which was during the Brexit debacle so the market was not particularly strong as uncertainty meant people put decisions to buy on hold. This year, the market was in the midst of lockdown with very few transactions able to take place.”
Buy-to-let: ‘resilient’
There was particular interest in the buy-to-let figures which showed a level of resistance to the economic and social challenges during Q2.
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said its performance was ‘of note’ and was shown in this data to be more resilient than many expected at that time.
“It proves that investors were still keen to look for opportunities in the rental market at a time when alternative investments offered little comfort,” he added.
Future prospects
Rob Barnard, director of intermediaries at Masthaven, said, looking ahead, the mortgage market was already showing the green shoots of recovery.
“Government initiatives such as the Stamp Duty holiday and extension of the Help to Buy equity loan scheme certainly helped to bolster demand amongst potential borrowers, and brokers also seem to be optimistic about the sector’s recovery,” he said.
“In fact, 71% of intermediaries said they feel confident about the market’s longer-term prospects, according to our recent broker survey.
“The mortgage and short-term lending sectors have proven to be remarkably resilient over the past few months, adapting the new circumstances and ensuring they remain open for business.
“The release of pent-up demand post-lockdown should help to bring activity levels back on track over the coming months, with a surge in non-traditional borrowers giving brokers new opportunities to work with specialist lenders to serve this expanding market.”
