Remortgage and mortgage lending has become tighter as lenders are forced to comply with new lending criteria.  The Mortgage Market Review (MMR) requires that borrowers pass a review of their spending and saving habits to assure they are being responsible in borrowing.  It also assures there is responsible lending which is a safety measure against the same crisis occurring in the future due to bad lending and borrowing practices that caused the recent global economic meltdown from which countries around the world are still struggling to emerge.

The tightening due to the MMR is being credited with the recent drop in mortgage approvals.  The drop resulted in an 11 month low according to the Bank of England.  May mortgage approvals have not been as low since June 2013.  Mortgage approvals for house purchases amounted to 61,707 in May down from the 62,806 in April. 

The decline in the number of mortgages approved in May was pushed to the side by an increase in both the month on month value level and the annual growth rate of mortgage approvals.  The month on month value increased by £2 billion while annual growth grew by 1.3%.

In an attempt to slow down the quick growth of house prices in the UK, the Bank of England’s Financial Planning Committee put into place a requirement of lenders to limit the number of mortgage and remortgage loans that are worth more than 4.5 times a borrower’s income.  Now such mortgage loans can only account for 15% of all mortgages held by a lender.

The tightening of lending and the MMR are in place to keep the economy on an upward path but homeowners seeking a remortgage should be aware that the process in securing a loan will take longer than before.  This time constraint should be taken into account when warnings become more prominent as to the coming of higher interest rates.