Mortgage approvals down 63.8%
Mortgage approvals down 63.8%
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Monday, 30, Jun 2008 10:31
Lending for house purchases has fallen by 63.8 per cent over the course of the last year, according to the Bank of England.
Just 42,000 mortgages were agreed in May, down from 58,000 in April and 63,000 in March.
This was the lowest level recorded by the Bank since comparable records began in 1993, and sharply down from the May 2007 peak of 116,000 deals.
The Bank of England also confirmed mortgage lending fell sharply to £4.1 billion in May from £6.2 billion in April.
This again was the lowest level since March 2001; markedly below the £7.1 billion monthly average for the previous six months.
"The Bank of England mortgage approvals data add to the plethora of data and survey evidence showing that housing market activity is being squeezed tightly by stretched affordability and tight lending conditions," commented Howard Archer, chief economist with analysts Global Insight.
"Elevated affordability pressures on potential house buyers stem from high house prices and modest disposable income growth, while very tight credit conditions are leading to markedly fewer and more expensive mortgages being available."
Depressed lending has precipitated falls in the average cost of property.
Research released today by property intelligence firm Hometrack finds average property prices fell by one per cent in June, leading to a 3.4 per cent fall over the last year.
HBOS – owners of the UK's biggest mortgage lender, Halifax - expects prices to fall by nine per cent by the end of the year.
"The data provides more conclusive evidence that activity in the housing market has fallen off a cliff this year as the lack of availability of mortgage finance has taken its toll on demand," explained Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors (Rics).
"With little evidence of any thawing in the credit crunch it is hard to see an early improvement in sentiment in the residential property market.
Mr Rubinsohn also points out the main support for prices at the present time is the lack of distressed sales.
However, whether this can be scenario can be sustained will ultimately depend on the performance of the economy and the extent of the upturn in unemployment.
The Bank of England also finds consumer borrowing rose to £1.4 billion in May.
This was up from £1.1 billion in April, and also ahead of the average increase of £1.2 billion over the previous six months.
Net credit card borrowing picked up to £556 million in May, while other loans and advances climbed by £820 million in March.
Chris O'Toole