Mortgage market to see short-term hit as consumer spending plummets

Severe economic disruption caused by COVID-19 will see a short-term hit for the UK mortgage market, but payments holidays should keep it afloat and see growth from 2021, says GlobalData, a leading data and analytics company.

GlobalData retail banking analyst, Resham Karira, commented: “GlobalData expects the UK’s GDP to decline in 2020 due to severe economic disruption. However, the impact on the mortgage sector depends on how long the outbreak will last. Mortgage holidays will support outstanding balances in the short-term, as banks are offering relief on payments for up to six months, but with consumer income shrinking (reducing the purchasing power) alongside social distancing and tightened mortgage requirements, new mortgage applications will drop in the short-term.”


GlobalData’s post-COVID-19 amended forecasts expect a decline of 1.3% in mortgage loans in 2020, down from 2.6% previously. Its overall compound annual growth rate (CAGR) over the forecast period is expected to drop from 2.5% to 0.8%, as the recovery will be slow – even when growth returns in 2021.

Karira continues: “Banks are only expected to see one year of negative growth in the mortgage market, and by 2023, growth levels will be close to pre-COVID-19 levels. Once restrictions on social distancing has lifted, mortgage lending will pick up in the latter part of the year. The mortgage market could likely keep afloat as long as unemployment remains low and people are able to service their mortgages. The impact on the sector will also be cushioned by measures being available for the most vulnerable borrowers”.

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