Mortgage numbers at six-month low

Updated: 

PA

The number of mortgage approvals made to home buyers has dropped to a six-month low, according to Bank of England figures, prompting some experts to suggest the pace of house price growth is likely to cool in the coming months.

Some 67,135 mortgages worth £10.7 billion got the go-ahead in March, the lowest number since last September, which was just before the Government's Help to Buy mortgage guarantee scheme was launched.

Meanwhile, borrowing on personal loans and overdrafts lifted by the strongest amount seen since February 2008, with a £1.1 billion increase in March, the Bank's Money and Credit report showed.

This findings come after the British Bankers' Association (BBA) recently reported that personal loan and overdraft borrowing was growing for the first time in more than five years in what it said was a "clear"
sign that consumer confidence is rising.

The latest number of mortgage approvals made to home buyers was 3.5% lower than in February and the figures have been edging down since more than 76,000 were recorded in January.

The findings were released as Nationwide Building Society reported that house prices had jumped by 10.9% over the last year to reach around £183,577.

Strong demand from potential buyers is said to have pushed up prices in recent months amid a lack of supply of properties to choose from.

Matthew Pointon, a property economist at Capital Economics, said: "The fall in mortgage approvals suggests that house price gains are likely to ease over the next few months.

"Demand for homes will continue to be supported by a growing economy, rising real earnings and expectations that prices are set to rise further.

"But set against that, banks are not engaging in the types of lending practices that have triggered past house price booms, and mortgage rates are beginning to rise.

"Taken together, that suggests house price gains will moderate towards a steady pace, rather than accelerate further, in the coming months."

Christopher Evans, an economist at the Centre for Economics and Business Research (Cebr), said the drop in approvals could have been triggered by a recent mortgage lending clampdown.

He said: "Tighter regulation on mortgage lending that took effect last weekend, with some lenders applying the changes early, may have caused the fall in mortgage approvals."

Some experts have previously warned that the Mortgage Market Review (MMR) rules could prompt a slowdown in housing market activity as lenders and consumers adjust.

Under the rules, 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.

Andrew Montlake, director of broker Coreco, said that while part of the drop in mortgage approvals "could be apportioned to the introduction of tougher lending rules, the truth is it is still too early to tell what effect such policies will have in the long term, particularly whether this will transmit to house prices".

The Help to Buy mortgage guarantee scheme, which offers state-backed mortgages to people with 5% deposits, has been injecting further activity into the housing market since its launch last October.

But the Royal Institution of Chartered Surveyors (Rics) recently said it had seen signs that the pent-up demand from aspiring home buyers that the scheme has helped to unleash is beginning to tail off.

More than 2,500 house sales were completed under the Help to Buy mortgage guarantee scheme between October and January this year, according to Government figures.

The Bank's figures also showed that credit card borrowing was "broadly unchanged" in March, with an uplift of just £45 million, compared with a recent average monthly increase of £200 million.

Meanwhile, net lending to non-financial companies recorded its sharpest decline since November, with a £2.3 billion decrease in March. Net lending to small and medium-sized enterprises (SMEs) fell by £1.1 billion in March, the largest drop since December 2012.

Howard Archer, chief UK and European economist for IHS Global Insight, said the jump in personal loan and overdraft borrowing in March "will likely fuel concern that UK growth has been too dependent so far on consumer spending, which is being partly fuelled by consumers increasing their debt or running down their savings".

He continued: "As demand for credit does pick up, it is vitally important for healthy and more balanced UK growth that all companies who are in decent shape and who do want to borrow, whether it be to lift investment, explore new markets or generally support their operations, can do so."

The people who affect house prices

The people who affect house prices