UK mortgage approvals fall again in March

LONDON Thu May 1, 2014 4:30am EDT

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LONDON May 1 (Reuters) - British mortgage approvals fell more than expected for the second month in a row in March, Bank of England data showed on Thursday, suggesting the introduction of stricter lending rules was affecting the market.

The BoE said mortgage approvals for house purchases numbered 67,135, their lowest since September last year and down from 69,592 in February. Mortgage approvals in January were the highest since late 2007.

Analysts in a Reuters poll had forecast 71,050 mortgage approvals were made in March.

Tighter rules on mortgage lending took effect last weekend, requiring more rigorous checks on whether borrowers can afford their loans. Some lenders began applying the changes earlier.

Before the 2008 financial crisis, monthly mortgage approvals ran at around 90,000, but the number of home sales has slumped since then and is only slowly starting to recover.

Net mortgage lending, which lags approvals, rose by 1.8 billion pounds, above expectations and its biggest increase since January 2012.

Consumer lending was also up strongly, increasing by 1.1 billion pounds, its biggest increase since September 2012.

Mortgage lender Nationwide said earlier on Thursday that house prices rose faster than expected in April to record their biggest annual rise since the start of the financial crisis, up 10.9 percent.

BoE Governor Mark Carney has played down suggestions that the housing market is overheating.

But earlier this week, the Bank announced tough new tests for banks which will have to show they could withstand a near 35 percent slump in house prices and a spike in interest rates.

The Bank refocused its Funding for Lending Scheme away from mortgage lending and dedicated it exclusively to helping business lending at the start of this year.

However, Thursday's data showed lending to non-financial businesses fell by 2.3 billion pounds in March, after a fall of 631 million pounds in February. Lending to small businesses alone fell by 1.1 billion pounds.

The BoE's preferred gauge of money supply, M4 excluding intermediate other financial corporations, fell 0.1 percent in the month, its biggest decline since April 2011, slowing the annual growth rate to 3.7 percent. (Reporting by William Schomberg and Belinda Goldsmith)

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