Mortgage approvals set to plunge by 70pc

HOUSING sales are forecast to nose- dive, with mortgage approvals falling by more than two thirds as the coronavirus lockdown hits the residential property sector.

The housing market was effectively halted on Thursday night by the Government after banks called for all sales to be frozen because they cannot get valuers out to properties.

Hansen Lu, property economist at Capital Economics, expected mortgage approvals for house purchases to drop by 70pc between April and June compared with the first three months of the year.

Howard Archer, chief economic adviser at consultancy EY Item Club, said the suspension will hit the economy as the world plunges into recession.

He said: “Obviously, all the players involved in a house purchase – estate agents, surveyors, removal companies – will not be generating any business, while banks will not be generating any income from new mortgages.

“Also when people move house they often tend to buy new furnishings [and] white goods, so there may well be a dampening impact on demand for these goods.”

John Cronin, an analyst at Goodbody, said lenders’ revenues will clearly be affected, although he added that banks make considerable margins from their existing loans. Banks are also expected to take a significant hit because they will not generate revenue from issuing mortgages.

John Cronin, an analyst at Goodbody, said lenders’ revenues will clearly be impacted, although he added that banks make a lot of money from their stock of loans.

It came as housebuilder Redrow became the latest construction company to stop work at sites due to concerns about the spread of the disease.

Redrow said it will seek to access a rescue package from the Government – despite a healthy balance sheet with assets worth around £1.6bn.

The FTSE 250 company, which built 6,443 homes last year and employs about 2,300 people, said work is becoming increasingly difficult due to disruption in its supply chains.

It has ordered all sites and offices to close immediately, and now plans to furlough a significant proportion of employees. Redrow is also targeting an ultra-cheap loan scheme offered to firms through the Bank of England.

It will reopen once supply chains are back to normal and it is safe for the workforce to return.

FTSE 100 housebuilder Berkeley Group suspended work on several sites where it said it was becoming increasingly difficult to source supplies.