The Bank of England (BoE) has released figures that show house purchase approval rate in UK has gone up 7.9% year-on-year in the month of July. In July, the number of approvals for house purchase was 66569 which was down 0.8% from the previous month.
The total value of purchase approvals was £10.8 billion in July. This was 16% more than the total value of purchase approvals in July 2013.
A slump in remortgage can be observed in the month of July. The total number of remortgage approval was 32984, down 3.8% from that of July 2013, which was 34298. The cumulative value of remortgage approvals in July 2014 was however 2% more than a year earlier. Seeing the trend, an analyst called Richard Sexton said “The mortgage market has fully adapted to the introduction of MMR, shown by a second month of healthy house purchase lending.”
The declining rate of approvals is the result of stricter lending policies imposed by high street banks and building societies. The policies were introduced earlier this year and since then purchase approval rate has been slowing down.
Another factor to consider is the Mortgage Market Review (MMR) introduced in April this year. The previous housing market crash was chiefly due to excessive lending. The MMR was supposed to curb unrestrained lending. In June the Bank of England introduced rules to cap the number of high loan to value mortgages.
Lenders have had a rough time coping with the new rules. Sexton’s instruction for them is “Lenders needed to train staff and get used to longer advisory processes as part of adjusting to the new rules.”
An interesting finding is the amounts that are being lent have pretty much been extremely large but the number of approvals has dipped. What caused this strange disparity? According to experts, since house prices have been eye-watering, only the wealthy ones can afford to buy such houses. Because of that lending amount has gone up but number of buyers has slumped. Added to that the MMR has been overly scrutinous and prevented many interested buyers from buying houses.
Looking at that, one real estate agent said “We are increasingly seeing a gap between agreed sales and sales that complete.” This has indeed been the case.