Lenders see mortgage approvals rate dropping in third quarter

The central bank’s quarterly Credit Conditions Survey showed some banks cited a tightening of mortgage standards as one reason why mortgage lending would ease off next quarter.

The survey also showed demand for secured lending by households - essentially mortgages - increased significantly in the second quarter.

“Some lenders noted that changes introduced as a result of the Mortgage Market Review might reduce approval rates somewhat,” the Bank said.

“In addition, some lenders suggested that a tightening in lending standards on large loans with high loan-to-income ratios may also push down their approval rate a little.”

The Mortgage Market Review introduced tougher tests to check borrowers’ ability to pay back their mortgages earlier this year.

Separately, Lloyds and RBS introduced limits to the amount people can borrow against their income.

The BoE also said there was no change in the availability of secured loans with a high loan-to-value ratio of above 75 per cent in the second quarter.

However, there was an increase in willingness to lend at ratios above 90 per cent.

The figures come ahead of the publication of recommendations from the Bank’s Financial Policy Committee on Thursday, which are likely to include measures to curb excessive mortgage lending.

Economists polled last week said this might comprise capping loan to income ratios on mortgages.

Official data last week showed house prices soared 9.9 per cent in April, their biggest annual rise since June 2010, heightening concerns that a bubble may be developing in the property market.

The BoE said lenders expect to increase credit availability to businesses in the third quarter. Data showed lending to non-financial businesses shrank by £2.4bn in April, compared with a fall of £2.5bn in March.