Mortgage approval volumes weakened in May and were 3.5% lower overall than in the same month of last year, the British Bankers’ Association (BBA) has reported.
The BBA said new mortgage rules appear to have impacted on volumes, but more so for re-mortgaging and other secured loans than for home purchase approvals, where volumes were similar to April.
Richard Woolhouse, chief economist at the BBA, said: “Our figures indicate that the heat appears to be coming out of the housing market. These are the first mortgage approval figures we have seen since the introduction of the Mortgage Market Review, so it is significant they have fallen for the fourth month in a row. This is being driven by a drop in remortgaging and people borrowing against the value of their homes.
“There has also been a welcome expansion in business lending this month bolstered by borrowing from the energy sector.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “All the signs are that the heat has come out of the London housing market, which had been storming ahead of the rest of the country. Applicant levels have fallen, according to the agents we deal with, with sealed bids and packed open houses dissipating. Clients are once again making offers on properties, rather than having to pay asking price or above in competition with several other buyers.
“There are rumours that Mark Carney will unleash new powers to control the housing market and attempt to curb risky mortgage lending. But he doesn’t need to do that: this was the whole point of the Mortgage Market Review – making sure lending is affordable today and tomorrow. The BBA suggests that the weakening in mortgage approval volumes in May is in part down to the introduction of the MMR, indicating that it is already curbing unsuitable lending.
“Swap rates have moved up, increasing the cost of fixed-rate borrowing but there are still some excellent rates available pegged at not much more than 3% for five years. So while there is a threat of an interest-rate rise looming on the distant horizon, which will have an impact on borrower’s inclination to take on new debt, there is no need to panic.”
