The findings from the British Bankers’ Association (BBA) revealed equity withdrawal approvals took a more severe tumble dropping 34% to 6,472 year-on-year while remortgage loans agreed fell by 21% to 21,272.
The value of gross mortgage borrowing in October fared better, rising 2% year-on-year to £10.5bn but was 1.3% lower than September’s figures.
Charles Haresnape, managing director, mortgages and commercial lending at Aldermore Bank, said: “Stricter lending criteria as a result of the implementation of [Mortgage Market Review] MMR is likely to be a significant factor in the lower levels of mortgage approvals in October.
“A level of uncertainty has entered the market recently, with lenders reviewing their interest rate stress tests and the Bank of England delaying a rise in interest rates.”
People were less likely to feel the need to remortgage while the base rate rise continued to be pushed back, Haresnape said.
The BBA’s economist Richard Woolhouse said that the cooling of the property market had continued in recent weeks. The monthly drop in mortgage approvals had jumped from a 10% decline in September to a 16% decline in October.
But he said consumers continued to show confidence in the economy as unsecured borrowing reached its highest growth rate in years.
While the effects of the stricter lending criteria stemming from the MMR is thought to be the likeliest cause of the drop in approvals, Brian Murphy, head of lending at Mortgage Advice Bureau said it was important not to jump to conclusions.
“…it’s important to recognise that October 2013 saw activity gathering steam at a pace that was prompting concern from some observers. Both the Funding for Lending Scheme (FLS) and Help to Buy were active in the mortgage market at that point and there is no denying that the removal of FLS and the arrival of the MMR have had a calming effect.
“However, there is also no getting away from the fact that the seasonally adjusted total for loan approvals in October is the lowest of 2014 and the lowest since March 2013 – the final month before the Help to Buy equity loan scheme got underway.”
The Intermediary Mortgage Lenders Association (IMLA) released a report yesterday which said that lenders wanted more clarification on rules around lending into retirement. It said the current feelings of uncertainty were leading to conservatism in the creation of lending policies for this type of borrower.
Murphy said the results of the report highlighted that some types of borrowers were feeling the effects of the MMR more than others.