New figures suggest that a trend of declining mortgage approvals accelerated last month, as they fell below market expectations. What do these latest figures mean for property investment funds with an interest in the residential sector?
Simon Morris: Adviser to Property Investment Funds
Simon Morris is a property specialist with a specific focus on key sub-sectors of the market, such as commercial, residential and industrial property. He advises property investment funds on which element of the market they should capitalise on, to collate high returns on their investment portfolio.
Simon believes that the economic recovery has certainly made residential property a stronger investment opportunity than it has been in recent years. However, the nature of the market demands that property investment funds display a certain level of caution. These latest figures show the fluidity of this specific property sector.
Lowest Mortgage Approval Rate since August
Data released this week by the British Banking Association (BBA), shows that mortgage approvals declined for the third consecutive month in April. In March 45,045 mortgages were approved, in April, this fell to 42,173.
Notably, this fell below the projected figure of 45,100, that the industry expected for April, and is the lowest figure since the previous August, when the number of approved mortgages slipped to 39,597. Experts including Chief Economist at IHS Global Insight, Howard Archer, have suggested that this data is the result of stricter regulation introduced by the Mortgage Market Review.
The Recent Introduction of Tighter Regulation
Director of Your Move, David Newnes, also spoke out on the significance of the numbers. He suggested that since more stringent restrictions on borrowing, tighter stress checks and affordability tests for lenders have only recently been introduced, this explains the emerging trend.
Newnes went on to say: “Now we are also seeing banks such as Lloyds place their own limitations to regulate home loans. But there is no reason for this to dent the confidence emanating through the property market.”
For those property investment funds with residential elements, you should note that this is a natural reaction to the recent surge in profitability enjoyed by the sector, a balancing act if you will. It further suggests that in the months to come, the market may level off.