The recent slowdown in the UK housing market might prove to be short-lived, as figures showed the number of mortgage approvals rose for the first time in five months in June. Approvals increased more than expected to 67,196, up from 62,007 in May, according to the Bank of England. The City had forecast a smaller increase to 62,600.
Economists said the figures suggested lenders were getting to grips with the new rules that came into effect under the mortgage market review (MMR) in April. The tougher rules require lenders to take additional steps to ensure people will be able to afford their mortgage repayments in the future.
Matthew Pointon, a property economist at Capital Economics, said the latest figures probably marked the beginning of a steady rise in mortgage lending over the coming months.
“The disruption caused by the MMR appears to be passing, with the Bank of England reporting a healthy rise in mortgage approvals in June. A strong economic recovery will ensure that lending grows steadily over the coming months.
“On balance, mortgage lending is likely to rise at a slow but steady pace over the rest of the year. In turn, that is consistent with further gains in house prices, although at a slower pace than that seen over the past 12 months.”
The Council of Mortgage Lenders also forecast a stronger picture for the mortgage market in 2014 and 2015. It revised up its estimate for gross lending in 2014 by £13bn to £208bn amid a stronger economic backdrop. That would represent an increase of 18% compared with 2013, and the first time that lending exceeded £200bn since 2008. The CML also raised its forecast for gross mortgage lending in 2015 by £14bn to £220bn.
It said: “There is a degree of uncertainty as to the possible impact of rate increases, given that households have not experienced such an event for seven years and that the backdrop is one where there has been a protracted fall in real incomes and uncertainty about future income growth.
“Given a favourable jobs market, it seems reasonable to think that the majority of households will cope well with initial gentle rate rises. Where households are financially stretched and do not have coping strategies, arrears will build, although this should be relatively slowly over time.”