New regulations a ‘speed-bump not a road block for mortgage market’
Rob Wood, chief UK economist for Berenberg Bank, said mortgage approvals slipped to 62,900 in April, from 66,600 in March according to the Bank of England as incoming regulations temporarily eased some pressure.
But he said the new rules will not end surging housing demand.
“Once banks work through the operational issues, it is unlikely that the new rules will permanently cut credit supply much. The fall in mortgage approvals exaggerates the change in the housing market. Banks had seemingly boosted approvals before the new regulations.
“They rose to 75,800 in January from 67,000 in October, and have now slipped back. We expect approvals to return to a rising path in the second half of the year.”
Wood noted banks are taking longer to process mortgage applications to accommodate the MMR, but suggested this won’t be a fundamental brake.
“Banks are still easing credit availability, particularly at high loan-to-value ratios, while housing demand is likely to keep growing while the central bank has its pedal to the metal on interest rates,” he said.
Wood said in fact, gross mortgage lending rose rapidly in April despite the nine-month low in mortgage approvals with £18.4bn of gross lending up from £17bn in March.
“It seems the mortgages that are being approved are for higher value properties, reflecting sharply rising house prices,” he said.