52% fall in new mortgage approvals in 2008

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by Lin Freestone

The number of new mortgages for house buyers approved by the UK’s banks fell by 52% in 2008.

Industry figures indicate that the number of mortgages approved for house purchase rose in December 2008 from November’s record low. Even so, they are barely half the level they were a year ago.

The British Bankers’ Association (BBA) reports that the number of approvals rose from 17,339 in November to 22,051 last month, but were 47% down on December 2007.

The increase should not be seen as a real recovery in lending. David Dooks of the BBA considers that it is more likely to reflect delayed activity from November.

He said that the banks approved less than half the 2007 number of loans for house purchase, reflecting falling demand from households facing greater economic uncertainty and double-digit falls in house prices over the year, which led to a wait-and-see mentality.

In spite of the drop in interest rates, house prices and sales are still falling as the credit crunch continues to diminish the supply of mortgage funds. Lenders are selecting only the most creditworthy customers when considering mortgage applications.

According to the BBA, in 2008 gross mortgage lending by the main high street banks totalled £170bn. This is 23% less than the £221bn loaned in 2007.