MMR slashes home lending

The Mortgage Market Review (MMR) has hit house purchase lending, which fell for the third consecutive month in April.

Home lending has now fallen 17% in three months, according to new figures from e.surv, which said the MMR is largely to blame.

House purchase approvals dropped 6% between March and April to 63,170.

That means there were more than 13,000 fewer home loans in April than in January, when 76,251 loans were approved.

House purchase approvals are still 15.3% higher than 12 months ago, but recent monthly falls are stalling the market recovery.

A combination of tighter regulation and shortage of housing stock is to blame, said Richard Sexton, director of e.surv chartered surveyors.
The MMR regulations have temporarily slowed lending in the market.

"Borrowers must now prove that they can withstand potential interest rate rises up to 7%, as well as answering a host of detailed questions about future finances.

"But the slowdown has also come from the supply side. Lenders have invested time training staff and implementing lengthier advisory meetings, which has capped their capacity to process applications. It has led to an interim lending lull."

Sexton said this is more than made up for by the benefits of the new system, in ensuring lending is sustainable and borrowers can afford their repayments even when base rates rise.

MMR is not the only regulation putting the brakes on lending. The Bank of England is increasing stress testing of the top eight lenders, to make certain they can withstand a 35% fall in house prices, making them more resilient to any future financial problems.

"That means banks will need to build capital buffers, which may result in a further lending slowdown in the short-term.

There were 48% more high-LTV loans than in April 2013 and more than three times as many compared to April 2009, five years ago.

One-quarter of loans in the North are to high-LTV borrowers, compared to just 5% in London