Mortgage approvals hit a four-month low

Published on Wednesday 21 July 2010 16:32

MORTGAGE lending slipped last month to the second lowest level since May 2009, the latest downbeat housing market figures showed yesterday.

Approvals for house purchase loans dropped to a four-month low of 34,813 in June, down from 36,418 in May and compared with a recent peak of 45,433 last December, the British Bankers' Association (BBA) revealed yesterday.

The total value of lending was below the average of the past six months, although high levels of mortgage repayments saw the net lending figure rise by 2.1bn.

The figures reinforced fears that the housing market is on the brink of a fresh slump, with the recovery of the past year seemingly over. The Halifax house price index has fallen for three successive months, its latest update showed, while the Royal Institution of Chartered Surveyors last week said buyer demand had slumped to its lowest point for two years in June.

Howard Archer, chief UK and European economist at IHS Global Insight, said: "The BBA data showing low and falling mortgage approvals in June reinforce our suspicion that house prices will fall back by 3 to 5 per cent over the second half of 2010."

The BBA said consumers continued to pay down their debts in June, with repayments on credit cards, personal loans and overdrafts far outstripping the amount of debt being taken out.

Archer said the focus on reducing debts was due to the uncertain economic climate and the fiscal squeeze.

"Indeed, the grizzly June emergency budget may well have intensified consumers' concern about the economic outlook and jobs and increased their desire to improve their personal finances," said Archer.

Meanwhile Clydesdale Bank has reiterated that compensation for customers affected by the lender's overpayment glitch would continue to be arranged on a case-by-case basis.

It was revealed earlier this week that 18,000 customers on variable rate mortgages, including 10,000 Scots, face repayment hikes after underpaying an average of 800 due to a calculation error by the bank.

The bank is refunding borrowers who had paid too much interest while their mortgage balances were higher than they should have been. However it has rejected calls to go further to put all those affected back in the position they would have been in had the error not occurred.

A spokesman for Clydesdale told The Scotsman that it was handling compensation claims individually.

"We are applying the premise of putting people back in the position they would have been in had the error not occurred. We are trying to do that with the minimum of impact to customers and it might mean compensating them."

Customers in financial difficulties would get extra assistance where necessary, he added.

"Waiving repayments can be part of the compensation. For most people we are looking at other flexible options.".