Mortgage approvals fall to 11-month low as housing market cools down

The total value of new mortgages for house purchase in the month fell to £10 billion

Mortgage approvals fell to an 11-month low in May, confirming that the lending market was already losing some steam before the Bank of England announced new curbs last week.

The Bank reported today that there were 61,707 mortgage approvals in the month, an 18.7 per cent decline from their recent peak in January and the lowest monthly figure since June 2013.

This is the fourth-consecutive month that the volume of mortgage approvals — the earliest stage in the house-purchase process for many buyers — has fallen.

The total value of new mortgages for house purchase in the month also fell to £10 billion, down from  £12 billion in January, although mortgage lending net of repayments was slightly stronger than analysts had expected at £1.98 billion.

Last week the Bank’s Governor, Mark Carney, pictured, said forecasts for rising household mortgage debt were a “concern” as he unveiled new official restrictions on the proportion of high loan-to-value mortgage loans banks can make each quarter.

The Bank also tightened up the interest-rate stress tests that lenders must impose on borrowers before a loan is granted.

Some analysts argue the trend of declining volume of mortgage approvals is a sign the mortgage market review controls imposed in April are already curbing loan growth and that the Bank’s additional restrictions last week are unnecessary.

However, Paul Hollingsworth of Capital Economics predicted today the volume of mortgage approvals will soon start growing again.

“We expect mortgage lending volumes to stage a gradual recovery in the second half of this year” he said.

Average house prices rose 9.9 per cent in the year to April according to the Office for National Statistics, with gains seen in every region. However, more up-to-date house-price indexes have pointed to a moderation of growth in the wake of the introduction of the MMR.

Figures from the British Bankers’ Association last week also showed the lowest number of mortgage approvals since August 2013.

Elsewhere, a survey by Citigroup today showed public expectations for inflation over the next five to 10 years edging lower to 3 per cent in June from 3.1 per cent in May.

Expectations of price increases over the next year, however, were unchanged at 2.1 per cent. The official reading for consumer price inflation was 1.5 per cent in May.

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