Responding to the Bank of England’s Credit Conditions Survey lenders said they expected mortgage approvals to decline in the coming three months, caused by changes brought about by the Mortgage Market Review.

This sentiment echoed the discussion held by members of the Monetary Policy Committee in their June meeting which said it was possible the MMR would cause an ‘enduring drag on lending’ as criteria became tighter.

The committee said borrowers may have to reduce the size of the loan they had applied for or delay their purchase until their income increased to a level which could meet lenders’ affordability tests.

The Bank expects approval levels to stabilise over time when short-term issues such as staffing training and IT issues, necessary to adjust to the MMR, had been implemented.

But, it said, the effect on the value of loans may be permanently subdued.

Earlier this month, George Osborne gave Mark Carney the power to cap the value of mortgage loans compared to family incomes and property values in an attempt to the cool the housing market.

Lloyds Banking Group and Royal Bank of Scotland, both partially owned by the government, were the first lenders to cap income multiples. Santander has just followed suit.

The banks set a limit of four times income on mortgages of more than £500,000.