Mortgage approvals hit new low while house sales halve in just one year

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by Kay Murchie

According to figures from the British Bankers’ Association (BBA), mortgage approvals for house purchases have fallen to a record low.

The BBA said its members approved just 21,118 new home loans in June, down 23% from May and down 66.4% compared with the same month last year. The annual fall was the largest since BBA began collecting data in September 1997.

The BBA’s members make up approximately two-thirds of mortgage lending. However, figures due next week from the Bank of England, which cover all lenders, are likely to show the same picture.

The slump in approvals is due to the lack of mortgages which was triggered by the credit crisis.

The number of homes sold this year will probably be the lowest since the recession of the early 1990s, according to BBA’s statistics director, David Dooks.

The BBA’s figures for mortgages approved, but not yet actually lent, are considered to be a good barometer of near-term trends in the market. Consequently, they indicate that the collapse in sales is a trend likely to continue for the remainder of 2008.

In related news today, the number of house sales have halved in a year, according to official figures.

The news reveals the severity of the slowdown in the UK property market.

According to figures from HM Revenue and Customs, in June 2007, 140,000 homes were sold for £40,000 or more. One year later, the figures show that just 77,000 homes were sold in June 2008.

Prospective buyers are being discouraged from the market currently due to the difficulty in securing a mortgage while others are waiting to see what happens with house prices.

Many economists are predicting as much as a 35% fall by the end of 2010.

Furthermore, figures from Essential Information Group, established that the number of repossessed properties coming up for sale in auction houses has soared almost 300% in just a few years.

In the period January to June, 3,115 repossessed homes went up for auction in Britain, compared with just 799 in the same period during 2005.