Mortgage approvals plummeted to an all-time low in May, leaving many would-be buyers with no alternative but to rent for longer.
The latest Bank of England data shows that the number of mortgage approvals in May fell far short of expectations, with only 9,300 approvals, as the Covid-19 pandemic pushed the housing market to a virtual halt.
New mortgage approvals collapsed by 90% compared to pre-pandemic levels and represent just a third of the lowest level seen during the 2008 financial crisis. May’s mortgage approvals were also below economists’ forecasts of 25,000 new approvals.
Franz Doerr, founder and CEO of flatfair, said: “With the number of mortgage approvals falling far short of expectations and setting a new low in May, it is clear that the housing market has not snapped back to pre-pandemic levels.
“The consequence of this will be to accelerate the recent trend of Britons renting for longer than ever before. The rental sector needs to continue its work to make life better for tenants, both in terms of being able to rent the kinds of properties they want easily, and also in offering homes that are fit for a new wave of remote working and social distancing.”
Remortgage approvals fell to 30,400, marginally less than the 34,400 recorded in April.
The value of purchase approvals hit £1.9bn in May while remortgage approvals amounted to £5.3bn.
Gross mortgage lending rose slightly to £14.8bn in May, compared to £14.4bn April.
Hina Bhudia, a partner at mortgage broker Knight Frank Finance, commented: “Leading indicators suggest lending has been picking up since May, but it's clear there is still a long way to go before many borrowers experience anything resembling pre-pandemic conditions.”
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The days of the high loan to value mortgage are over, in order to get a mortgage now FTB will need a much bigger deposit, a good secure well paid job and a squeaky clean credit history, no shortage of good quality tenants out there for our properties.
I struggle to source good quality occupants i.e. those who can pass the necessarily stringent RGI requirements for themselves or a guarantor.
It therefore remains the case that whilst my occupants are still OK and paying I am very vulnerable to rent defaulting occupants.
I'm simply not prepared to continue with such circumstances.
It really isn't worth the additional yield.
I would feel far happier with reduced yield by way of reduced LTV following property sales.
Indeed had the LTV maximums been 50% I would be in a far securer position as I would have fewer mortgaged properties.
75% LTV is simply too high especially when considered in the light of the eviction ban.
I would have no issue in all new BTL mortgages being a maximum of 50% LTV.
That would enforce prudence on LL.
Of course it would result in a vastly reduced private rental stock which would mean many hundreds of thousands of homeless tenants.
That would be a very good thing as those rental properties remaining would be able to achieve far higher rents.
If anything this CV19 crisis has proven that leverage above 50% is very risky when Govt gives the ability for feckless tenants to stop paying rent and an eviction ban imposed.
Even 50% LTV looks risky in this situation.
Reducing or eradicating leverage is a key business imperative for such LL if they wish to achieve business resilience to avoid a lender ever repossessing their properties.
But I do believe tenants and FTB should be allowed IO loans so that LL could offload rental properties to these aspirant OO.
This would immediately achieve 2 Govt objectives.
To reduce the capacity of the PRS and to enhance the purchase of residential properties.
It is clear that having vast multiples of BTL properties is a very risky business strategy.
To have far more resilient portfolios must make business sense.
Mind you with reduced rental stock Govt doesn't have any plan as to where all the homeless tenants are supposed to live.
But that won't be a LL problem.
Those remaining LL would surely be inundated by desperate tenants seeking to source a very scarce rental property.
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