BBA mortgage approvals fall surprisingly sharply

Growth in the number of mortgages approved by UK lenders fell surprisingly sharply in April, according to data from the British Bankers' Association (BBA).

There were 40,104 home loans approved in the month, down from the 43,854 approvals the BBA counted in March and short of the 44,800 consensus forecast.

House purchase approval numbers also resumed a downward trend, falling 6% year-on-year after seeing increased activity during the three previous months as borrowers completing purchases ahead of the stamp duty increase in early April.

Gross mortgage borrowing of £12bn in the month was 12% higher than in April 2015, though this was a slowdown from the month before.

While mortgage approvals were lower, net mortgage borrowing was also still 3% higher than a year ago, when the housing market endured some pre-election jitters.

The BBA data followed that from the Royal Institution of Chartered Surveyors (RICS), which recently reported the first fall in buyer enquiries in April since March 2015, with buyer enquiries falling at the fastest rate since August 2008.

“As expected, growth in mortgage lending has fallen back sharply on last month proving that March’s results were just a Stamp-Duty spike," said Rebecca Harding, the BBA's chief economic advisor.

Consumer credit data showed continued annual growth of roughly 5%, which the BBA said reflecting improved confidence and in the case of personal loans and overdrafts favourable interest rates.

Harding said that the growing level of personal deposits alongside disappointing individual savings account deposits suggested "consumers are using easy-access savings while the outlook for the economy remains uncertain", adding that increases in real wage growth "may start to have positive knock-on effects on long-term savings if it is sustained".

Mark Harris, chief executive of mortgage broker SPF, said the looming European Union referendum cannot wholly be blamed for the perceived slowdown.

"More importantly, general confidence in the economy, both domestically and globally, as a whole has fallen. Activity at the top end of the market is muted as it comes to terms with higher stamp duty."

He also pointed out that remortgaging had continued to go from strength to strength, with many borrowers worried that interest rates will start to edge higher.

"There are some excellent deals available and lenders remain keen to lend so there are likely to be plenty of options for borrowers in coming months, assuming they meet tighter affordability criteria," he said.

Economist Howard Archer at IHS Global Insight said that while the data clearly reflected a marked waning of interest from the buy-to-let and second home sectors following the stamp duty rush, it also "may well have reflected heightened concerns and uncertainties over the UK economic outlook".

"The strong suspicion is that housing market activity will be pressurized in the immediate term by a combination of weakened interest from the buy-to-let and second home sectors as well as heightened concerns and uncertainties over the UK economic outlook, particularly in the run-up to June’s referendum on EU membership."