July 31, 2014 - The UK mortgage approvals saw a rise in June, after declining from February to May; amid new stricter lending rules imposed by banks.
According to the Bank of England, after a four month decline and witnessing an 11-month low of 62,007 in May, the mortgage approvals rose to a four month high of 67,196 in June.
The implementation of tighter lending policy at the start of the year by high street banks and building societies was responsible for the changes witnessed in the mortgage approvals over the first two quarters of the year. The introduction of the Mortgage Market Review in April, which was designed to curb the excessive lending seen in the run up to the last housing market crash, further compounded the situation.
Mark Carney’s view of the hot housing market being the biggest threat to the UK’s economic recovery has further frightened buyers and lenders. Even though there has been an increase in the mortgage approvals for June, the approvals are still well below the 74-month high of 76,214 seen in January. This points out that the demand has declined because of record prices and the fact that under the new rules fewer people are managing to secure a mortgage.
The housing market has also witnessed some changes, with Right move reporting the first asking price falls of the year at the start of July and Home track announcing that it is now taking twice as long to sell your house in London as it did in March.
Howard Archer, chief economist at IHS Global Insight says “Nevertheless, the appreciable rise in mortgage approvals reported by the Bank of England in June fuels uncertainty as to whether the recent loss of momentum in housing market activity is likely to be lasting or just a temporary development related to changing mortgage regulations, and whether there will be a significant easing back in house price growth."
Archer further adds on that "We take the view that while house prices will highly likely keep on rising over the coming months, it is probable that the gains will be more restrained compared to the recent peak levels."
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