Mortgage approvals fall to record low

Permalink: Mortgage approvals fall to record low
by Kay Murchie

The number of new mortgage approvals have fallen to their lowest level since records began over 10 years ago.

The figures from the British Bankers’ Association established that in December 2007, 42,088 new loans were approved for house purchase - 38% below the level for December 2006.

Furthermore, total mortgage advances also declined during the month to levels not seen since September 2005. A total of £15.1 billion was advanced to consumers during the month, down from £16.5 billion in November and 22% below the figure for December 2006.

David Dooks of the BBA said mortgage lending weakened considerably during the latter half of 2007 as the credit squeeze impacted on banks’ ability to lend. In addition, demand for mortgages also softened in the face of increased borrowing costs and lower disposable income.

The combination of these factors is resulting in the marked market slowdown and weakness in house prices we are now seeing added Mr Dooks.

Howard Archer, chief UK and European economist at Global Insight, said the figures provide further proof that housing market activity is now being significantly undermined by both stretched affordability and tightening lending practices.

Mr Archer concluded that this adds to the already intense pressure on the Bank of England to cut interest rates next month and to implement further reductions in the future.