The number of mortgage approvals have reduced according to the British Bankers’ Association (BBA) by 16% over the year.
Mortgage loans to homebuyers have hit a 17-month low with 37,076 approvals in October compared to the high reached in January of 48,649.
The main reasons for this are tougher bank of England lending requirements for income multiples, higher property prices, the uncertainty of the general election and rising interest rates next year.
Nationwide building society also reported lower figures with net mortgage lending to first time buyers, home movers and remortgage buyers lower by £2 billion to £3.6 billion in the six months to September. However, lending to buy-to-let landlords increased slightly over the same period.
For older homeowners there is higher activity with equity release mortgage buyers accessing money in their property to improve their quality of life or even reduce inheritance tax owed by their beneficiaries.
House price growth slowing
House price inflation reduced to 8.5% in November down from 9.0% in October according to the Nationwide.
For the month of November house prices increased by 0.3%, lower than the previous month of 0.5% with average property prices now at £189,388.
In contrast, the Land Registry has reported an increase in house price inflation from 7.2% in September to 7.7% in October for England and Wales.
The difference in the figures is due to the Land Registry including cash sales which are up to a third of totals sales. The figures also exclude the slower rising house price areas of Scotland and Northern Ireland.
Mortgage rules restricting loans
The Mortgage Market Review (MMR) could be having an adverse effect on residential loans due to tough rules on affordability to ensure borrowers can pay back loans.
Lenders are required to check the affordability of first time buyers, home movers and switching remortgage buyers including income levels, outgoings such as child care, holidays and living costs.
This does not apply to buy-to-let landlords as they must have a 25% deposit and show the rental income can exceed 125% of the lenders mortgage interest.
The industry is concerned that the rules are restricting lenders from providing mortgages to people into retirement.
In addition, the Halifax, part of the Lloyds Banking Group, is predicting house price inflation will slow from the recent peak in July of 10% growth per year to about 3% to 5% in 2015.
What are your next steps?
Speak to our LCM mortgage advisers if you are planning to move home, buying your first home, remortgaging your existing home to a new cost effective mortgage deal or are a buy-to-let investor.
Learn more by using the mortgage cost calculators, equity release calculator and property value tracker chart. Start with a free mortgage quote or call us and we can take your details.
For equity release buyers our London City Mortgage brokers can recommend lifetime mortgages allowing you to receive cash from your property to repay an interest only mortgage, pay for care at home or gift to a family member or friend.
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