Bank of England warns of second slowdown in mortgage approvals
The Bank of England sounded the warning in its Inflation Report released today which said that while lenders and their staff may have got to grips with the new processes borrowers may not have.
Mortgage approval figures had been weak during the first half of the year but showed signs of a recovery in June as 108,857 property loans were given the green light, 8.3% higher than May’s figures.
In its report the Bank said: “A number of factors may account for weak mortgage approvals in the early part of the year. The MMR, which was carried out by the Financial Conduct Authority to improve the functioning of the mortgage market, could have weighed on approvals as banks introduced new processes or trained staff.
“Those temporary constraints may now have started to ease but the MMR could also have more persistent effects if it affects the availability or terms of credit for some borrowers. In that case, it could take time for those borrowers to adjust their expectations and to find a property that they can afford.”
Following the release of property sales data from the National Association of Estate Agents, which showed the proportion of sales to first-time buyers fall to their lowest level since May 2013, brokers told Mortgage Solutions fledging buyers were holding back to reconsider their options.
Colin Chapman, director of Harlow-based broker Genesis, said a house in his area which was worth £135,000 in October last year would now be valued at around £170,000. Chapman said first-time buyers want to buy but the ‘huge’ uplift in prices was forcing them to rethink what type of property they could realistically afford.
The Bank said it expected the number of mortgage approvals to be around 75,000 a month, on average, in 2014 Q4.