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Mortgage approvals decline for third consecutive month

03 Jun 2014

According to figures released by the Bank of England (BoE) yesterday, the number of mortgage approvals has fallen for the third consecutive month, from a post financial crisis peak of 75,838 in January, to 62,918 in April - a decline of around 17%

When you add in anecdotal reports from estate agents around the country, reporting a cooling of enquiries in London and the South East, but the opposite in most other regions, it could be argued that a natural correction may be occuring in the housing market

The recent move by Lloyds TSB to limit mortgage borrowing multiples, and RBS suggesting it will do the same, may well have had the effect of cooling the Greater London and South East, but not affecting most of the rest of the country. Since the former are now showing average borrowing-to-salary multiples that were greater than at the previous peak, but everywhere else does not have worrying multiples, this could be the ideal outcome for the Monetary Policy Committee (MPC) - meaning they may not need to use the relatively blunt tool of interest rates to dampen house-prices, and therefore unnecessarily risk holding back the UK's economic recovery

The recently implemented Mortgage Market Review (MMR) is also having an effect on reducing mortgage approvals in the same regions

In summary, the natural correction is likely to help the MPC keep interest rates lower for longer, which, so far, has been the stated preferred path

For the BoE release see here


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