UK house prices
Mortgage approval rates have fallen for the second month in a row.Reuters

Britain's housing market has stumbled over the last few months as mortgage approvals fell to their lowest levels since October.

According to Bank of England data, mortgage lending fell by £1.6bn (€1.9bn, $2.7bn) in March, a 3.6% year-on-year decrease. It means that banks have approved fewer mortgages for the second successive month.

In total, there were 67,135 mortgage approvals in March, down from 69,592 in February. Analysts had forecasted that mortgage approvals will hit 72,000 for March.

The fall in mortgage approvals is likely to be linked with the tighter rules on mortgage lending, which came into effect in April.

Under the new criteria – known as the Mortgage Market Review – applicants are quizzed on their lifestyle in order to help lenders assess their eligibility for credit. It has been described as the biggest overhaul of the mortgage market in a decade.

The Bank's figures come on the heels of a Nationwide report which shows that UK house prices had hit their highest levels since 2007, with a 10.9% rise over the past year. In April alone, house prices rose by 1.2%, prompting fears that the market is overheating.

The latest Bank of England figures also show that loans to financial and non-financial businesses decreased by £69.9bn in March, with the majority of the decrease (£50.7bn) coming in the financial services sector.

Total lending to individuals rose by £2.9bn in March, outstripping the six-month average growth by £1bn.