Mortgage approvals falls to lowest level for 3 years

Permalink: Mortgage approvals falls to lowest level for 3 years
by Kay Murchie

Figures from the Bank of England has revealed that the number of mortgages approved for people buying a home fell to 88,000 during October, down from the 100,000 in September and the 6 month average of 109,000, providing more evidence of a cooling housing market.

Net lending, which doesn’t include redemptions and repayments, was just £7.33 billion, 29% below the amount lent in October 12 months ago and the lowest level since February 2005.

Higher interest rates and stretched affordability now proves there is little doubt that the housing market is cooling and the low level of approvals for house purchases suggests it may still have further to go.

Howard Archer, chief economist at Global Insight, said it is expected that these factors will continue to have an impact over the next few months. In addition, increasing speculation that the housing market could see a sharp correction over the coming months may also increasingly put off potential house buyers.

Mr Archer added that the credit crunch is making it increasingly difficult for mortgage lenders to get hold of adequate funds to finance new mortgage business.

Mortgage approvals were overall lower, with a total of just 236,000 loans for all purposes approved, down from a recent average of 279,000, while their value of £25 billion was the lowest for over 2 years.

Furthermore, approximately 87,000 mortgages were approved for people remortgaging, this was 13% below the average for the previous 6 months, while mortgage approvals for buy-to-let and equity release, also fell by 13% to 61,000.