UK Finance has reported that the second quarter of 202 saw new house purchase lending down 48% year-on-year.
Within this, homemover activity saw a larger decrease with the effects of lockdown exacerbated for these transactions, which generally rely on the successful formation of housing chains. Construction was one of the more badly-affected sectors and, consequently, lending for new build saw a significant decline, falling by nearly two-thirds year-on-year.
However, UK Finance says we can expect a strong initial recovery in Q3, with those transactions put on hold now able to complete. Q2 application volumes were in fact slightly up on the same quarter in 2019, fuelled by the backlog of activity from those transactions that were put on hold in the early weeks of lockdown. The housing markets in Wales, Scotland and Northern Ireland, having all reopened somewhat later, are likely to see rebounds come commensurately later as well.
Through the payment deferral scheme, mortgage lenders have been able to help unprecedented numbers of borrowers cope with the personal economic consequences of the pandemic. In total, lenders granted over two million deferrals to mortgage customers, the vast majority of which were in place by the end of April. However, following the end of June, when most of the initial wave of three-month deferrals came to an end and for the most part customers resumed payments, the number is now considerably lower. Although over 250,000 more deferrals have been granted since then, the total number in force now stands at 731,000.
As a result of this industry support for borrowers affected by the pandemic, mortgage arrears have been contained and the figure of 74,000 mortgages in arrears at the end of Q2 was only two% higher than the number in Q1 and three% below the number in Q2 2019.
Meanwhile, the moratorium on court possessions activity has meant that for the whole of Q2 and through to the end of Q3, the only mortgaged property possessions are those at the borrower’s request. In Q2 there were just 230 possessions, 88% fewer than the number in Q2 2019.
