The number of mortgage approvals for house purchase fell to just 9,300 in May, 90% below February levels, the Bank of England’s Money and Credit statistics found.
Approvals for remortgage also fell by 42% from February to 30,400.
Paul Stockwell, chief commercial officer of Gatehouse Bank, said: “The number of mortgage approvals in May is roughly a third of what they were during the worst of the financial crisis, which really puts the pandemic’s impact on the economy into perspective.
“The property portals are reporting strong demand since the market re-opened in mid-May. However, time will tell whether the pent up demand will come to fruition.
“June will be the first full month of property transactions since the UK went into lockdown and it will be these figures that will be hotly watched as a measure of how determined buyers and vendors who returned to the market have been.”
Despite this negativity, mortgage lending started to pick up in May. On a net basis households borrowed an additional £1.3bn against their homes, up from nothing in April but higher than the average of £4.1bn in the six months to February 2020.
John Goodall, chief executive of Landbay, said: “Mortgage borrowing increased in May and we can only hope that we have now turned the corner and will incrementally see demand increase month-on-month.
“It will be more challenging for many people to get mortgages however, particularly if they have been furloughed or lost their jobs. This is reflected in the dire situation where mortgage approvals were only a tenth of what they were in February.
“What this does mean is that the demand for private rental property is likely to increase as the year progresses. Those who would ordinarily have bought a property may well be struggling to do so and we have already seen demand from landlords increase sharply in the last month.”
This post has originally been featured in Property Wire.