U.K. house prices drop most since 2009 under virus lockdown
U.K. house prices fell the most in more than a decade and consumer borrowing plunged as the coronavirus lockdown shuttered the economy.
Property values dropped 1.7% in May, the biggest decline since February 2009, Nationwide Building Society said Tuesday. Separate Bank of England figures showed borrowing plunged in April, with consumers repaying a net 7.4 billion pounds ($9.3 billion) of credit, the most since comparable records began in 1993.
While the lockdown to stop the spread of virus is now starting to ease, the impact of the restrictions on businesses and workers has put Britain on course for its deepest recession for at least a century. Manufacturing continued to contract in May, and investors expect the central bank to increase bond buying this month.
The decline in borrowing mirrors a record drop in U.K. retail sales during the lockdown. Consumer credit posted its first year-on-year drop since 2012.
Lenders also granted the fewest home loans on record in April, with the number of approvals dropping to 15,800, the BOE said.
The majority of consumer repayments were for credit card debt. On a year-on-year basis, it fell for the second month running, contracting 7.8%. Growth in other loans and advances remained positive but weak.
The pound didn't react to the reports. It traded up 0.6% at $1.2561 as of 10:15 a.m. London time.
With reduced opportunities to spend, households may be building up savings, potentially laying the ground for a sharp pickup in consumer spending and the housing market in 2021. The question is whether they confident about running down that margin once life returns to some normality.
"Spending and borrowing naturally will rebound in June, when all nonessential shops will reopen," said Samuel Tombs, chief U.K. economist at Pantheon Macroeconomics in London. "But we doubt that households will spend the cash they have accumulated during the lockdown soon, given heightened job insecurity and lingering concerns about catching the virus."