9 June 2020

Bank of England: strong lending before pandemic hit

An increase in gross mortgage advances and the value of new mortgage commitments was recorded in the first quarter of the year, according to the Bank of England, before the impact of Covid-19 was felt.

Given what has happened since lockdown, this data feels historic but it shows what might have been had the pandemic not hit. The share of mortgages advanced to borrowers requiring a loan-to-value (LTV) greater than 90 per cent was 5.2 per cent, an increase on the previous year, illustrating the level of demand for high LTV deals. With lenders including Accord, Clydesdale and Virgin Money pulling out of the 90 per cent LTV market this week owing to high demand, after only recently returning when physical valuations were once again allowed, there is clearly a need for the big lenders to commit to this market. The number of people taking out high LTV mortgages in the second quarter is likely to fall considerably, not due to lack of demand but lack of products available.

Encouragingly, buy-to-let lending remained stable, even though the sector has come in for a lot of change on the tax and regulatory front. Investors are adapting to the new environment and tailoring their portfolios accordingly. The impact of tenants unable to pay their rent is providing a further challenge for landlords, although of course this won’t be apparent until the second-quarter figures.

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