Mortgage approvals surged before Covid-19 crisis

Mortgage approvals rose to a six-year high in February as confidence briefly returned to the property market before the onset of the coronavirus crisis, the Bank of England said.

Approved loans for house purchases reached 73,500 in February – the highest monthly total since January 2014 and 12% more than the average for 2019. Remortgage approvals also rose to 53,400, the BoE said.

The figures show the housing market beginning to revive after December's general election reduced short-term political uncertainty caused by Brexit. But the market has virtually shut down in March to comply with government measures to combat Covid-19. Many mortgage lenders have severely cut their mortgage range too.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "The surge in mortgage approvals … confirms that the general election result revitalised the housing market. Admittedly, many of these proposed transactions likely will not be completed any time soon, due to Covid-19. Moreover, house purchase mortgage approvals likely will collapse over the coming months, now that virus-related restrictions and fears mean very few homes can be viewed."

The sharp rise in mortgage lending was not replicated in consumer credit. Households borrowed an additional £0.9bn in February – down from £1.1bn in January. Net borrowing on credit cards was zero, weaker than in recent months. Businesses borrowed £1.3bn – below the two-year average but stronger than the preceding four months.

Tombs said the figures showed household finances in relatively good shape before the Covid-19 pandemic took hold.

"Consumers were cautious and preferred to build up a precautionary buffer of cash," Tombs said. Households also continued to borrow cautiously … The economy is less vulnerable to a pull back in consumer credit than on the eve of prior recessions."