Further fall in mortgage approvals

First published in National News © by

The number of mortgage approvals made to home buyers has dropped for a fourth month in a row and is now at the lowest level since June last year.

Some 61,707 mortgages worth £10 billion got the go-ahead in May, 19% below January's peak of nearly 76,000, amid signs that the launch of stricter lending rules may be having an impact on the market.

Under the Mortgage Market Review (MMR), lenders have to spend more time questioning anyone looking to buy a home or remortgage about their personal spending habits, to assess whether they can afford their mortgage.

Lenders will also have to make sure an applicant could still cope with repayments when interest rates eventually rise.

House prices have jumped 10% across the UK in the last year but last week the Bank of England took out insurance against an overheating market with plans for a cap on home loans and stronger checks on affordability.

Today's figures from the Bank showed that net mortgage lending rose to a six-year high of £2 billion in May from £1.8 billion in April, although this is thought to reflect the earlier pick-up in mortgage approvals and higher house prices.

Ed Stansfield, chief property economist at Capital Economics, believes that the the recent weakness in mortgage approvals will not last much longer and that lending will pick up steadily over the rest of the year.

He added: "Although the growth in new buyer enquiries has cooled notably since the turn of the year, perhaps reflecting growing uncertainty about when and how quickly interest rates will increase, demand is still rising.

"Moreover, consumer confidence is buoyant, employment growth is strong and the squeeze on households' real incomes has eased, all of which will underpin mortgage demand."

Today's figures also showed that unsecured consumer lending rose by £700 million in May, in line with the average over the past six months. Net borrowing on credit cards rose by £200 million, having seen its biggest rise in three years during the previous month.

It also emerged that net lending to non-financial companies jumped by £3.4 billion in May, the first increase since last September.

Net lending to small and medium-sized firms still fell by £152 million, although this was better than declines of £629 million in April and £1.1 billion in March.

Howard Archer, chief UK economist at IHS Global Insight, said the rise in bank lending to businesses was a welcome development.

However, he added: " It remains to be seen if May's marked increase in lending to businesses is the start of an improving trend. There have been false dawns before."

Comments (1)

Please log in to enable comment sorting

2:05pm Tue 1 Jul 14

welshmen says...

No need for Interest rate rises then....good news....
No need for Interest rate rises then....good news.... welshmen
  • Score: 0
Post a comment

Remember you are personally responsible for what you post on this site and must abide by our site terms. Do not post anything that is false, abusive or malicious. If you wish to complain, please use the ‘report this post’ link.

Send us your news, pictures and videos

Most read stories

Local Info

Enter your postcode, town or place name

About cookies

We want you to enjoy your visit to our website. That's why we use cookies to enhance your experience. By staying on our website you agree to our use of cookies. Find out more about the cookies we use.

I agree