BoE: Mortgage approvals fall to record low

Permalink: BoE: Mortgage approvals fall to record low
by Kay Murchie

The Bank of England has today revealed that the number of mortgage approvals for homebuyers has fallen to 33,000 in July, down by 71% compared with the same period last year.

According to the Bank of England, the figures are the lowest since it started gathering data in 1999, and highlight the continuing downturn in the housing market.

The credit crunch has meant that borrowers are finding it increasingly difficult to obtain a loan and this has deterred prospective buyers from purchasing a home.

Last week, the Nationwide revealed that the average house price has fallen by 10.5% over the last year – this represents the fastest fall since 1990.

According to Adrian Coles of the Building Societies Association, activity in the housing market continues to be weak and the figures from the Bank of England suggest this is likely to continue.

For the second consecutive month, building societies saw their mortgage lending, to all types of borrowers, shrink.

Meanwhile, the collapse in business by specialist lenders other than banks and building societies, i.e. those specialising in sub-prime mortgages, has also been noted in the Bank of England’s figures.

Last July, these types of lenders approved 32,000 mortgages for house purchase while in July this year, they lent just 2,000.

Commenting on the figures from the Bank of England, Howard Archer of Global Insight believes the weak mortgage data demonstrates that activity in the housing market is depressed and point towards further falls in house prices over the next few months.

Global Insight has forecast that house prices will fall by 15% in 2008 and 12% next year.