BoE: mortgage approvals fall to record low

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Figures released by the Bank of England today revealed that 42,000 home loans were approved in May, which is a 27% decline compared with April and represents a 64% fall compared with 12 months ago.

The Bank said the figures were the lowest since it began recording the data in 1993. The figures were also lower than many analystsa�� expected.

Since the credit crunch, financial institutions have tightened their lending criteria and has meant that mortgages have been hard to obtain.

A recent report by Moneyfacts revealed that there are now 3,847 mortgage products available (including residential, sub-prime and buy to let), compared to 4,054 in April and 15,599 in July 2007.

Philip Shaw, chief economist at analysts Investec, said it is really symptomatic of what is going on the housing market and the real danger is there is a knock-on effect to consumer activity.

In addition, the Bank of England figures showed a decline in the number of mortgage approvals for homeowners who were re-mortgaging.

In May, the figure slumped to 90,000, down from 100,000 the previous month and below the monthly average over the previous six months of 104,000.

According to Ed Stansfield of Capital Economics, the figures show the change in attitude among mortgage lenders and home buyers.

People no longer want to borrow and those that do want to borrow are being turned down by the lenders, added Mr Stansfield.

House prices have continued to fall and many reports indicate that house prices have further to fall.

In addition, a report last week by property website, Rightmove, revealed that over one million homes are currently on the market in England and Wales.

Rightmove said around 172,000 homes were put up for sale during the period May 11 and June 14, pushing the total number on sale above one million for the first time since records began.

The figure reflects the panic among homeowners desperate to sell their homes before values slide even further.

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