The number of mortgage approvals have reduced in the last four months following the Mortgage Market Review and worries about interest rates.
Data from the British Banking Association show that mortgage approvals have reduced to 41,757 in May compared to 41,934 in the previous month and significantly lower than the high in January of 48,412.
Mortgage approvals for first time buyers were 3.5% lower in the month when compared to a year ago and re-mortgage approvals also fell 15% to 18,206 loans.
New rules taking effect
New rules were introduced in April by the Mortgage Market Review (MMR) imposing tough checks on homeowners taking out mortgages.
This applies to remortgage buyers, first time buyers and home movers with tests on affordability taking into account income and outgoings such as child care, holidays and living costs.
Lenders must also apply a stress test to ensure the mortgage remains affordable even after interest rates rise in the future.
This does not apply to buy-to-let landlords as they must have a 25% deposit and show the rental income can exceed 125% of the notional mortgage interest.
Richard Woolhouse chief economist at the BBA has said that the new figures indicate that the heart appears to be coming out of the housing market.
He said it was significant that the mortgage approval figures have fallen for the fourth month in a row since the introduction of MMR. The fall is also being driven by a drop in re-mortgages from homeowners.
Mortgage data misleading
Even though the data suggests the housing market is slowing down, the Council of Mortgage Lenders (CML) describes this as a ‘statistical fog’.
Even though mortgage approvals were lower, 100,360 homes were sold in the UK during May, increasing from 95,600 the previous month.
The total value of mortgages was unchanged at £16.5 billion but this figure is 12% higher than a year ago. In addition activity and prices have been rising faster in London than the rest of the country.
The rise in house prices allows the older equity release buyer to access money in their property with a lifetime mortgage to consolidate debt or reduce inheritance tax owed by your beneficiaries.
It appears that although the number of mortgage approvals have been falling the average value of the loans have been increasing.
What are your next steps?
Talk to our London City Mortgage brokers for advice if you remortgage your existing home and want the best mortgage deal or release capital, buying your first home, moving home or are a buy-to-let investor.
Learn more by using the equity release calculator, mortgage cost calculators, and property value tracker chart. Start with a free mortgage quote or call us and we can take your details.
For older homeowners releasing equity from your property, our LCM mortgage advisers can recommend the lifetime mortgage, accessing wealth to maintain your lifestyle or even or gift a child or grandchild the deposit on their first home.
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