New lending down for purchases and equity withdrawal

Latest figures from the Bank of England show a fall in the number of new mortgages approved for home buying in November.

During the month, 83,000 new house purchase mortgages were approved, down from 89,000 in October and the lowest monthly figure since the beginning of 2005.

Simon Rubinsohn of the Royal Institution of Chartered Surveyors interprets the data as “further evidence of a sharp downturn in activity in the housing market”.

It certainly reinforces predictions that “spring”, in terms of the housing market, will come late in 2008.

During 2007, average UK house prices rose between 5% and 8%, with higher interest rates impacting on property inflation towards the end of the year.

However, many potential first-time buyers remain priced out of the market and property experts expect prices to fall during 2008, or at best, stay level.

While the Bank of England is expected to reduce interest rates early this year, the housing market is still feeling the effects of the five base rate rises imposed from August of 2006.

The Bank is also urging lenders to be cautious and cut back their lending, with the result that there has been a reduction in the number of people borrowing money against the increased value of their homes, a process known as housing equity withdrawal.

In November only 60,000 loans of this nature were approved, the lowest number since the start of 2001.

The money borrowed in this way in commonly used to subsidise general spending and the figures suggest that consumer spending will slow in 2008.

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