News Column

UK mortgage approvals drop to lowest level since June 2013

July 1, 2014

Katie Allen



The number of mortgages approved in the UK fell to its lowest level for almost a year last month, suggesting tighter lending rules may be taking some of the heat out of the property market.

The Bank of England said 61,707 mortgages were approved in May, down from 62,806 in April and broadly in line with expectations in a Reuters poll of economists. It was the lowest monthly total since June 2013.

Mortgage approval numbers are closely followed by economists as a timely indicator on housing market activity, which some surveys suggest has come off the boil in recent months.

The dip in May approvals follows the introduction of new lending rules in April under the Mortgage Market Review (MMR), which force banks and building societies to undertake tough affordability checks before they grant loans.

The BoE has been closely monitoring prices for signs of a bubble but has so far held off from imposing any of its own forceful policies to rein in the market. Last week its financial policy committee introduced measures that will only bite if house prices rise more than 20% by 2017.

Paul Hollingsworth at the thinktank Capital Economics said the latest data provided more evidence of the housing market recovery losing steam.

"Given that the Financial Policy Committee (FPC) refrained from introducing any measures to sap the housing market recovery of its current momentum last week, the latest money and credit figures may come as a welcome sign that the housing recovery is losing some steam of its own accord," he said.

"This was the fourth successive fall in approvals, and leaves them . . . 19% below this January's peak."

Rob Wood, UK economist at German private bank Berenberg, said house prices would still shoot up this year even if recent changes by the BoE and the mortgage market review might have a short-term influence on buyers' behaviour.

"After the temporary disruption from tighter regulations has passed, we expect approvals to return to their upward trend and we look for house prices to gain 10% in 2014 and 2015," he said.

The BoE's data on the amount of mortgage lending showed it rose more than expected by pounds 1.99bn in May - the biggest increase since July 2008. Unsecured lending to consumers also rose faster than expected, up by pounds 740m in May, well above forecasts for pounds 600m.



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Source: Guardian (UK)


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