Similar figures last week from the BBA had shown the lowest number of approvals since August 2013.
However the figures showed there was strong growth in net mortgage lending in May, reflecting past mortgage approvals and rising house prices.
Mortgage lending rose by £1.9 billion pounds in May, its biggest increase since July 2008, and in the three months to May it rose at 1.7% annually, its fastest growth rate since September 2008.
Richard Sexton, director of e.surv chartered surveyors, commented:
“A sense of calm is beginning to pervade the market, as the zest in the mortgage market begins to cool down. MMR has temporarily put the buffers on lending, as banks adjust to lengthier advisory processes and stricter stress-testing rules. Monthly house purchase approvals have fallen a fifth since the beginning of the year. MMR is forcing forward thinking among borrowers and banks alike, testing finances against the effects of a base rate rise. A sense of reality is starting to set into the market, as the first signs of cooling property prices are beginning to emerge.
“The new rules restricting the proportion of high LTV loans will prevent the number of ‘highly geared’ households becoming unsustainable. But it is fundamental that caps on small deposit lending are accompanied by greater house-building, or first-time buyers may start to run out of options. The Bank of Mum and Dad is drying up. Wages are only slowly recovering. And savings rates are still rock bottom.
“High LTV loans are a way of keeping the property market accessible to borrowers striving to save for a deposit, who haven’t benefited from capital gains. Capping high LTV lending may leave many borrowers with few options to get onto the ladder. More must be done to stimulate wage rises and upscale property development to give first-time buyers finances a chance to catch up with property prices – without solely resulting to high LTV lending.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, says:
"Total mortgage lending continued to be strong in May, with the monthly figure higher than the average seen over the previous six months. However, the number of mortgage approvals was lower for both house purchase and remortgaging, suggesting that the heat has come out of the housing market.
"Estate agents are reporting that applicant levels are falling, with fewer sealed bids and packed open houses. More property is coming to market as panicked vendors worry about missing the top of the market.
"June's data will show more clearly how much of an impact the mortgage market review rules are having but with remortgaging numbers falling in May, it indicates that existing homeowners could already be struggling to meet the tighter criteria being imposed by lenders. This will be a particular problem when interest rates do start to rise, if borrowers become mortgage prisoners trapped on high standard variable rates with nowhere to go.
"Given this backdrop, we find it surprising that the Bank of England feels it needs to act further to curb the lending market and impose new restrictions.
"The threat of an interest rate rise is bound to have an impact on people's inclination to take on new debt, with speculation rife as to when it will happen. However, with many borrowers now opting for fixed rates this is largely academic. With Swap rates edging up, fixed-rate mortgages are also on the rise although it is still possible to fix for not much more than 3 per cent for five years so there is no need for buyers to panic."
