Mortgage approvals at lowest level since 1995

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by Kay Murchie

The signs of a cooling housing market are evident again as the number of new mortgages approved fell to a 13-year low, according to figures by the Bank of England. The last time the monthly figures were so low was in 1995.

The data shows that in December 2007, 73,000 new mortgages were approved compared to 117,000 in December 2006, a decline of 37%.

Ian Kernohan, an economist at Royal London Asset Management, said the latest mortgage approval numbers show that the current housing slowdown is more pronounced than in 2005.

Mortgage approvals for people re-mortgaging increased slightly to 97,000, however the number of mortgages for other purposes including equity release and buy-to-let, continued to fall.

The figures come just one day after the Land Registry said house prices in England and Wales fell by 0.4% during December.

Philip Hammond, Conservative treasury spokesman, said buyers who borrowed steeply believing Government claims of ‘permanent growth’ had been betrayed. ‘The collapse in mortgage lending shows that the credit squeeze in the financial markets is now having a serious impact on the real economy, depressing housing market activity and house prices, Mr Hammond added.

In the Commons, Prime Minister Gordon Brown, responded and denied the housing market was in crisis and added mortgage repossessions are a fifth of what they were in the early Nineties.