Mortgage lending plummets amid Brexit fears and buy-to-let slowdown

The number of mortgage approvals for house purchase in April tumbled by a fifth amid uncertainty over the European Union referendum and a crackdown on buy-to-let lending.

According to the April Mortgage Monitor from chartered surveyor e.surv, there were 57,512 house purchase approvals in the month, down 19.4% from March. Annually, this figure dropped 14.9% from April 2015. "The mortgage market is entering a more turbulent phase," said Richard Sexton, director of e.surv.

On 1 April, Chancellor George Osborne introduced a 3% levy on top of basic stamp duty rates for purchases of additional property, a move to cool demand in the buy-to-let market and lessen competition for first-time buyers, prompting a rush of activity before the new tax year.

And tighter rules for the buy-to-let mortgage market from the EU have come into force, which include stricter affordability tests over concerns that the current period of ultra-low interest rates may fuel risky lending. The Bank of England is currently consulting on its own regulatory regime for buy-to-let with a view to tightening lending rules.

Moreover, political uncertainty surrounding the Brexit referendum on 23 June, in which voters may choose to pull the UK out of the EU, is dampening demand in the housing market as investors hold off until after the crunch vote.

There is also the prospect of an interest rates hike by the Bank of England. Policymakers want to lift the base rate from the record-low 0.5% as the economy fully recovers from the effects of the 2008 financial crash, though a recent slowdown and global economic turmoil has prompted some calls for further cuts to rates instead.

"Despite all these ongoing risks, the underlying core of the lending market appears strong enough to weather such tests," Sexton said. "For some first-time buyers, prospects are improving and despite rising house price costs, lenders remain keen to help credit-worthy borrowers get on the property ladder."