The early months of 2014 have been following a trend as the number of mortgage approvals have continued to drop since January. The latest month’s figures are now available and April saw 42,173 mortgages approved for home buyers. This marked a significant drop once again on the previous month, which saw 45,045 loans go through.

The end of April saw the new mortgage rules come in, so it is unlikely the above figures do not take into account any changes seen in how mortgages are approved. The longer process involved in this area is likely to delay any mortgages applied for in the early weeks of May.

So could the level of approvals drop further in the weeks and months to come?

Certainly it looks very likely we will see a further drop in the immediate future. According to Money Saving Expert two thirds of the major banks and building societies have indicated longer interview times. This is likely to have an impact on the speed at which approvals or rejections are decided upon.

However the figures do not show the whole picture

In the past few years the highest amount of money lent to all mortgage applicants was seen in August 2008. However this April scored the highest level since then, as the total amount rose to £12.2 billion. This is in stark contrast to the drop in the level of actual mortgages that are being approved. As one level goes up, the other goes down, pointing at an increase in the size of the mortgage being approved.

Is this down to rising house prices?

House prices certainly have been rising recently, especially in London and the South East. The figures in this part of the country tend to skew the overall results, making it harder to assess what is going on in the country as a whole. Clearly some areas are struggling more than others and are therefore experiencing stagnant or barely moving house prices.

The Bank of England is set to make moves if necessary

The rising house prices – set against the falling number of mortgage approvals – are still of concern to the Bank of England. Those in charge are watching progress closely since rising prices could lead to problems in the housing market.

The introduction of the new mortgage rules should dampen things on the mortgage front in the coming months. However as we can see there is a lot more to think about here than we might expect. The bigger question is perhaps whether house prices on the whole will start to drop as time goes on. The higher the average price goes, the more likely it is that more people will be tempted to take on more than they can reasonably afford to pay back if interest rates rise.

Clearly we could still be heading for troubled times on the housing front – especially where the size and availability of mortgages is concerned. We shall be watching.

Comments