Fresh record low for mortgage approvals

Published on Wednesday 23 July 2008 21:13

THE number of mortgages approved for house purchase fell to their lowest level in over a decade in June, the British Bankers' Association (BBA) reported yesterday.

The BBA's members account for two-thirds of all mortgage lending in the UK and approved just 21,118 loans to buy property over the month, down 23 per cent from May and 67 per cent lower than the corresponding month last year. The level was the lowest since BBA records began in September 1997.

In value terms, banks approved 3.3 billion of mortgages for house purchase, 66.4 per cent lower than a year earlier and compares with a six-month average of 5.9bn.

Remortgages accounted for a record 55 per cent of all mortgages, against just 19 per cent for house purchase.

The figures indicated that 2008 would be the worst year for the housing market since the early nineties recession, said the BBA. "Another record low number of mortgages approved by the banks for house purchase means that the whole market is likely to be at its least active since the early 1990s," said David Dooks, statistics director at the BBA. "However, even in this rapidly slowing market, net lending has still grown by 12 per cent over the past year and there continue to be significant numbers remortgaging with the banks."

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, said there was little to suggest that conditions would improve in the coming months. "The continuing lack of availability of mortgage finance is proving a major drag on the level of property transactions and is increasingly being felt in the real economy."

The BBA also revealed that new spending on credit cards fell to 7.3bn in June, down from 7.53bn in May.