Mortgage approvals up 10% in July but is the property market finally cooling?

11th September 2014


Mortgage advances for home buyers jumped 10% month-on-month during July and 21% on an annual basis. But despite the robust headline figures they hint at a slight easing in the UK’s property market.

Paul Smee, director general of trade body, the Council of Mortgage Lenders (CML) who compiled the data said: “The market has shown steady growth in house purchase and buy-to-let over the past few months with general improvements in economic factors across the UK allowing for more people to enter the property market.”

But Howard Archer
, chief UK & European economist
 at IHS Global Insight highlighted that while the numbers indicate that the housing market is indeed seeing steady growth, the bulk of the evidence indicates that activity has lost some momentum compared with the earlier months of this year, including the Royal Institution of Chartered Surveyors (RICS) survey for August that came out overnight.

He said: “Specifically, the August RICS survey reported a second consecutive drop in buyer enquiries. The RICS also reported that agreed sales had fallen for the first time since September 2012.

“In addition, latest data from the Bank of England show that mortgage approvals eased back to 66,569 in July after picking up to 67,085 in June from a 10-month low of 61,914 in May.”

June notably had witnessed the first rise in mortgage approvals for five months. Archer believes the slowdown in mortgage activity between January and May was clearly influenced by the introduction of the new Mortgage Market Review (MMR) regulations that came into effect in late April, which put greater onus on mortgage lenders to assess the ability of potential borrowers to meet their initial and future mortgage payments.

He said: “It is likely that many lenders had to adapt their procedures, such as introducing more rigorous interviews with prospective borrowers and checking facts. This likely delayed the processing of mortgages, and it could well take longer to process them going forward.

“While the overall increase in mortgage activity from May’s low suggests that lenders are increasingly getting to grips with the MMR regulations, there still appears to have been some underlying moderation in housing market activity. Significantly, July’s mortgage approval level of 66,569 was still appreciably below the 74-month high of 76,295 seen in January.”


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