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MMR rules hit mortgage approvals

The number of mortgage approvals made to home buyers has dropped to the lowest level since last summer , according to Bank of England figures.

Some 62,918 mortgages worth £10 billion got the go-ahead in April, the lowest number since July and 17% below January's peak of nearly 76,000.

The slowdown in housing market activity comes amid rising property prices and the launch of stricter lending rules, which came into force at the end of April.

Under the Mortgage Market Review (MMR), lenders have to spend more time questioning anyone looking to buy a home or remortgage about their personal spending habits, to assess whether they can afford their mortgage.

Lenders will also have to make sure an applicant could still cope with repayments when interest rates eventually rise.

Despite the slowdown in approvals, economists believe the Bank of England's Financial Policy Committee may take further action to rein in the housing market as soon as its meeting later this month.

Likely measures may include higher capital requirements for banks for mortgage lending and limiting maximum loan-to-value ratios for mortgages.

Howard Archer, chief UK economist at IHS Global Insight, said: "While the MMR may well have some impact in reducing the risk of an overall housing market bubble developing, it will unlikely be sufficient as far as the Bank of England is concerned."

Meanwhile, today's figures also showed that unsecured consumer lending moderated to £666 million in April after rising to an 18-month high of £1 billion in March from £588 million in February.

Net borrowing on credit cards rose by £435 million in April, the largest increase in three years, although it followed a net repayment of £19 million in March.

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