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Mortgage approval rates fall again (5 January 2015)

Date: 05/01/2015
Duncan Lewis, Legal News Solicitors, Mortgage approval rates fall again

Figures from the Bank of England show that mortgage approval rates continue to fall, suggesting an ongoing slowdown in the property market.

House buying and selling tends to be seasonal, with the winter months traditionally slower than in spring and summer.

However, the Bank of England says that, in November 2014, home loan agreements fell to 59,029 – the lowest level since June 2013 and a fall from October’s total of 59,511 mortgage approvals.

In January 2014, there was a record number of mortgage approvals – a total of 76,611.

January 2014 figures for mortgage approvals represented the highest level for 74 months, however – since the credit crunch took hold in 2008.

In September 2013, the second phase of the government’s Help to Buy scheme was launched for first-time buyers, with the first phased launched in April 2013 aimed at families wishing t buy a larger home.

Plummeting numbers of mortgage approvals in November 2014 – just over one year after the launch of the second phase of Help to Buy – signal a 23% fall in the number of mortgages approved, compared with the January 2014 spike in loan approvals.

Lenders have expressed concern over homebuyers over-extending themselves financially, however – and as a result tougher criteria for homebuyers were introduced in April 2014, with lenders questioning borrowers more closely about how they spend their money. Monthly outlay on leisure pursuits such as gym membership, eating out and mobile phone top-ups now form the basis of many mortgage applications.

Some analysts claim that this is a contributing factor to the decline in mortgage approvals – as well as uncertainty over when the Bank of England will raise the base rate and signal that interest rates will begin to climb again.

Despite the fall in mortgage approvals, house prices across the country are continuing to climb, but there has also been a recent slowdown in property prices.

The government introduced changes to Stamp Duty in the Chancellor’s Autumn Statement in November, which meant that homeowners buying homes worth more than £937,000 face larger bills for Stamp Duty.

Homebuyers buying properties under £937,000 now pay less Stamp Duty – with homes under £250,000 not attracting any Stamp Duty. However, many homes in the UK are above the Stamp Duty threshold, with the average price of a home in London now in excess of £500,000.

The upper limit for the Help to Buy scheme is £600,000 – which may explain why take-up of Help to Buy has been less widespread in London, compared with the rest of the country.

The chief UK and European economist at IHS Global Insight, Howard Archer, has said that the recent Stamp Duty reform should have a “beneficial impact” on the residential property sector – but added that analysts at IHS Global “doubt it will cause housing activity and prices to see a major turnaround”.

Duncan Lewis Housing Solicitors

Duncan Lewis is a leading firm of housing solicitors and offers expert help to homebuyers and first-time buyers with competitively priced conveyancing services.

Duncan Lewis is also one of the UK’s leading providers of Legal Aid services and can advise homeowners on issues such as debt management and mortgage repossession.

For expert legal advice on housing law, conveyancing services and mortgage repossession, call Duncan Lewis housing solicitors on 020 7923 4020.

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