Mortgage approval rates fall in May
Fears are growing that the housing market could slow in the UK after the number of mortgage approvals dropped 3.5% in May compared to 2013. The British Bankers Associations latest report shows that the number of mortgages approved by banks fell in May, the fourth consecutive drop in approvals.
Approval rates were down from 70,294 in April to 65,132 in May, 10,000 below the average of the past six months and a drop of 3.5% on the same period last year. This latest drop follows new lending rules that came into force in April which forced lenders to carry out tough affordability checks before granting loans.
The British Bankers Association said the latest rules, “appear to have impacted on volumes”. BBA chief economist Richard Woolhouse added, “Our figures indicate that the heat appears to be coming out of the housing market.
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“These are the first mortgage approval figures we have seen since the introduction of the MMR, so it is significant they have fallen for the fourth month in a row.”
Remortgage approvals also fell in May, down to 18,206 compared with 20,448 approved loans in April. Secured loan also saw a dip from 7,913 in April to 5,168 in May. The remortgage dip came before news from the Bank of England indicated that a rise in interest rates could come as soon as this year, which could spur more borrowers into switching.
Chief UK economist at IHS Global Insight Howard Archer talked about the introduction of the latest MMR saying, “These regulations put a greater onus on mortgage lenders to assess the ability of potential borrowers to meet their initial and future (based on higher interest rates) mortgage payments.
“It is also likely that some of the recent slowdown in mortgage activity has been due to lenders getting to grips with the new MMR regulations and adapting their procedures, such as introducing more rigorous interviews with prospective borrowers and checking facts. This could make it a longer process to approve a mortgage.”