30th March 2015
Mortgage approvals ticked-up modestly for third month running in February to hit a six-month high according to new figures from the Bank of England.
The data adds to growing evidence which suggest that the UK housing market is starting to bounce back from its recent lows. However despite last month’s rise, home load approvals were still a substantial 18.1% below the peak level seen in January 2014.
Specifically, the latest numbers show that mortgage approvals for house purchases rose to 61,760 in February, from 60,707 in January, 60,258 in December and a 17-month low of 58,944 in November. Previously approvals had retreated for five successive months to November’s low, from a 74-month high of 75,453 in January last year.
Howard Archer, chief UK and European economist at IHS Insight suspects that housing market activity has bottomed out and expects it to pick up “to a limited extent as 2015 progresses”.
He said: “This suspicion is reinforced by the third successive rise in mortgage approvals for house purchases in February by the Bank of England. In addition, latest survey evidence from the Royal Institute of Chartered Surveyors(RICS) show that buyer enquiries stabilised in February after falling for seven successive months. The RICS survey also showed that agreed sales rose marginally in February and January, which were the first increases since July 2014.”
The significant drop of mortgage approvals from the January 2014’s peak was clearly initially influenced appreciably by the introduction of the new Mortgage Market Review (MMR) regulations that came into effect in late April. These regulations put greater onus on mortgage lenders to assess the ability of potential borrowers to meet their initial and future mortgage payments.
“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. Indeed, it is notable that the Bank of England’s Trends in Lending quarterly survey for October reported that some of the slowdown in mortgage lending over the summer was due to lenders getting to grips with operational issues related to the introduction of the Mortgage Market Review,” added Archer.
“However, the fact that mortgage approvals continued to fall through to November – after lenders got to grips with the new mortgage regulations – pointed to a clear underlying moderation in housing market activity. With housing market activity seen gradually picking up over the coming months, we forecast house prices to rise by around 5% in 2015.”