UK Finance’s Household Finance Review for Q2 2020 shows the extent to which house purchase lending plummeted over the quarter as the housing market was halted due to lockdown, with home-mover activity hit severely.
The lockdown across the country had brought the economy to its knees as the country’s workforce had been pressured to work from home or not work at all. UK is now in a recession as the effects of the lockdown has shown through the lack of cash flow going through the various sectors.
Impact on Housing market
Following the first quarter, which showed flat year on year growth, lending turned immediately and sharply negative. For Q2 overall, house purchase activity was down 48% compared to Q2 2019. Volumes in April were less than half those seen a year previously with a similar annual rate of contraction in May.
With the market partially reopening in May, June saw an easing of the rate of contraction, but activity remained considerably below the levels seen in June 2019. With the overall contraction, the heaviest fall was seen in the home-mover numbers, which fell by over 60%. The first-time buyers and buy to let purchases also fell by significant amounts.
Despite seeing the worst of the initial wave of COVID-19 infections, the UK Finance data shows that the southern regions of England have been somewhat less severely impacted, although clearly very significantly down by nearly 50% year on year. The biggest impacts, however, have been seen outside England. Places like Northern Ireland have seen new mortgages for house purchase fall by nearly two-thirds compared with Q2 2019.
Comments from directors and executive officers at these housing firms are suggesting that customers will still need support despite the steady growth in people returning and investing into new apartments and houses.