Mortgage approvals at record low

The British Bankers’ Association (BBA) has published figures for December mortgage approvals showing a fall in the number of new loans, to 42,088, the lowest level since data collection began, in 1997.

In monetary terms, new approvals totalled £15.1 billion, an amount close to that of September 2005.

The value of all mortgages approved during December totalled £16.5 billion, a 10% reduction on December 2006.

However, net lending (lending after redemptions and repayments have been taken into account) increased slightly in December, to £4.7 billion as compared with £4.6 billion in November.

The number of loans approved for remortgages also increase slightly, to around 62,771, compared with 59,628 in November.

BBA statistics director, David Dooks, says: “Mortgage lending weakened notably in the second-half of 2007 as the credit crunch impacted on banks’ ability to lend, at the same time, demand for mortgages also softened in the face of increased borrowing costs and lower disposable income.”

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

Commenting on the figures, Howard Archer, chief UK and European economist at Global Insight, the forcasting consultancy, says: “The December BBA mortgage data provide yet further evidence that housing market activity is now being substantially undermined by both stretched affordability and tightening lending practices.”

Mr Archer adds: “This adds to the already intense pressure on the Bank of England to cut interest rates in February, and to enact significant further reductions thereafter.”

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