Mortgage approvals are set to “fall significantly” in the coming quarter as banks aim to reduce the risks of lending, according to a survey by the Bank of England.
The survey came just a few days before the Bank of England announces whether it will be clamping down on mortgage lending or not in order to restrain the housing market.
It is likely that the Bank’s Financial Policy Committee (FPC) would have discussed the rocketing house prices in their meeting last week, and that there will be some consequences in an announcement on Thursday.
The FPC could well enforce a loan-to-income cap (LTI) on potential borrowers, preventing them from borrowing money that they theoretically won’t be able to pay back.
“Some lenders suggested that a tightening in lending standards on large loans with high LTI ratios may push down their approval rate a little,” a Bank of England statement read, regarding their recent survey.
Opposing these predictions however, the Mortgage Market Review, which was supposed to reduce the amount of risky mortgages, which came into force earlier this year, has been reportedly found to neither reduce the amount of applications, nor had an effect on the rate of mortgages that are approved.
This should be a good sign, potentially indicating that people are still managing to acquire mortgages, but at a rate that they will be able to keep up with in the future and not fall into debt trying to pay off.
