Data from the Bank of England points towards a cooling UK housing market as figures show mortgage approvals are lowest since July 2013.

The number of mortgage approvals in September was 61,267 and significantly lower than the month of August at 64,054 according to the Bank of England.

Mortgage lending has reduced by 8.7% over the last year and is a 14 month low. They are about 19.9% lower than the levels reached in January of this year.

Figures from the Land Registry show that house prices in England reduced by 0.2% in the last month with the average UK house price at £177,299.

The lack of suitable properties on the market at an affordable price for home movers means they will remain in their current house and saving for a bigger deposit.

Mortgage interest rates lower

Data from the Bank of England showed that average interest rates paid on homeowner such as remortgage buyers reduced to 3.20% in September, the lowest level since records began in 1999.

Interest rates paid on mortgages for new purchases such as by first time buyers and buy-to-investors have increased slightly to 3.22%.

For older equity release mortgage buyers, fixed rates can typically be secure from interest rates of 5.9% upwards without any evidence of earnings which is important for borrowers with only pension income.

However, mortgage costs could increase if the Bank of England introduces significant safety measures for banks and building societies. This includes new leverage levels relating to the reserves banks must hold to protect against a downturn.

The Financial Policy Committee (FPC) is expected to go beyond global standards set by the Basel Committee on Banking Supervision of 3% leverage and introduces a 4% or 5% leverage.

A 4% leveredge would require banks to make a £1 provision for every £25 of loans thereby increasing financial strength but increase the cost of a mortgage.

Mortgage approvals likely to recover

Mortgage approvals in January 2014 were 76,472 but remain significantly below levels reached in the same month back in 2007 with approvals at 119,987.

The original decline in mortgage approvals earlier in the year was thought to be due to the mortgage market review (MMR) introducing new rules after April.

These rules mean lenders must check affordability of borrowers such as income levels and outgoings such as child care, holidays and living costs. Lenders should now have the new system in place to deal with the extra time needed to approve mortgages.

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 mortgage interest.

With property prices on a plateau, the Bank of England likely to keep interest rates at 0.5% until after the election and strong economic growth, mortgages approvals should recover this year.

What are your next steps?

Call our LCM mortgage brokers for advice if you are a first time buyer, want to remortgage your existing home for the best mortgage deal, moving home or are a buy-to-let investor.

Learn more by using the property value tracker chart, mortgage calculator and equity release calculator. Start with a free mortgage quote or call us and we can take your details.

For equity release buyers our London City Mortgage advisers can recommend lifetime mortgages allowing you to receive cash from your property for home improvements, holidays or even give to a family member.

Learn more by using the property value tracker chart, mortgage cost mortgage calculator and equity release calculator. Start with a free mortgage quote or call us and we can take your details.

Use your dashboard to access online mortgage quotes, money off vouchers and start your mortgage application online 24/7 on desktop, tablet or smartphone.