Mortgage approvals drop 4.5%

Mortgage approvals drop 4.5%

Mortgage approvals fell by 4.5 per cent last month, according to the Bank of England.

The BoE’s Money and Credit report, published today (May 1), showed the number of approvals for house purchase had dropped to 62,300 in March, 4.5 per cent down on the previous month.

Mortgage approval rates — where a consumer is told they are eligible for a mortgage but is yet to actually borrow the money — are typically an indicator of how the future mortgage market will fare as these consumers are likely to go on to borrow the funds in the upcoming months.

The report also showed net lending for mortgages increased by 24 per cent in March as consumers borrowed an extra £4.1bn in the mortgage market in March, compared with £3.3bn in the month before.

According to the new data, annual growth rate of mortgage lending was 3.3 per cent in March, up from 3.2 per cent in February. The rate has remained relatively consistent, at about 3 per cent, since the beginning of 2016.

The remortgage market remained consistent as approvals for remortgage increased 0.8 per cent from the previous month to 49,713. 

Data released by UK Finance showed the number of people getting approved to remortgage increased by 11.1 per cent year-on-year in March and the number of people opting to remortgage is expected to reach a peak later this year.

Richard Pike, marketing director at lending software firm Phoebus, said: "The BoE figures this morning show quite a mixed picture when you look at the increase in overall mortgage lending, but the fall in approvals in the month.

"When you consider the recent HMRC report, which shows property transactions falling, these latest figures bear out predictions that as we approached the Brexit deadline people were becoming more cautious."

But John Phillips, operations director at Just Mortgages and Spicerhaart, said the hefty stamp duty was a bigger issue for buyers in the market.

"Last month, the House of Lords Committee on Intergenerational Fairness and Provision recommended changes to stamp duty as it is ‘seriously distorting the market’ and I think a major shakeup could be the answer," he said.

"Stamp duty makes up such a huge proportion of the cost of moving that many of those who want to upsize are choosing to extend instead, while those who want to downsize are staying put in what is often an unsuitable sized home."

Kevin Roberts, director at L&G Mortgage Club, said activity in the mortgage market was remaining steady amid wider economic uncertainty.

He added: "The growing number of products available and increasingly competitive rates, particularly at 95 per cent loan to value, continue to entice those looking to take their first steps. 

"Similarly, with many borrowers’ two-year fixed terms coming to an end last month, we expect to see growth in remortgage activity as they hurry to lock into competitive rates while they last."