The last year has seen a continual improvement in the number of mortgage approvals going through each month. It was perhaps inevitable therefore that sooner or later we would see a drop. As it turned out, February 2014 was the month to produce that drop.
Significant drop in approvals last month
January’s figure showed there was a healthy 76,753 approvals that month. However this dropped back by nearly 6,500 during February. This resulted in a total figure of 70,309 approvals last month.
Many experts within the industry had pointed to the likelihood of a fall occurring during February. According to some sources January’s figure was significantly higher than was expected, and therefore a balancing of the books was highly likely last month.
What caused the large drop?
The actual drop was however larger than was estimated. It is thought this is because of the bad weather experienced by some parts of the country during February. Extensive flooding in parts of Somerset and the South East meant some people who were thinking of moving may have postponed their plans until the flooding receded and life got back to normal.
However the governor of the Bank of England, Mark Carney, played down suggestions the lower figure indicated a slowdown in the market. Instead he confirmed the belief that January’s rather high figure made February’s drop seem bigger than it actually was.
How healthy is the housing market?
Many experts will now look to the figures for March to see whether they present another drop in fortunes for the housing market, or alternatively a better outlook for the months ahead. New and tougher rules on mortgage approvals are about to come in that will also undoubtedly have an effect on the situation.
The most interesting thing about February’s figures is where they stand in relation to last year and to the housing market prior to the economic crisis. According to official figures the approvals in February 2014 were an impressive 33% up compared to February 2013.
In addition, many have concerns over whether the housing market is overheating and is heading for another crash. Mark Carney dismissed this suggestion and indeed the level of mortgage approvals is still well below the levels seen before the economic crisis struck in 2008. Back then the average monthly approvals totalled some 90,000. It is fair to assume the Bank of England and other analysts will be keeping a close eye on the approvals we are seeing at present.
Perhaps the changes we are about to see with the mortgage rules will provide the slowdown some experts think is advisable. House prices are still rising considerably though, so it will be interesting to see how things progress with the monthly figures from now on.
It may be that some are looking to get mortgages quickly before the new rules come in. This might lead to another spike in mortgage approvals for March, especially as those who postponed the approval process owing to the floods start the process once more.