Approvals for new mortgages plunge 64%

The British Bankers’ Association (BBA) has reported a 64% annual decline in mortgage approvals for house purchases, in August.

In all, 21,086 new home loans were sanctioned during the month, compared with 58,564 in August 2007.

The figure is 5% down on July 2008 and at its lowest since BBA records began in 1997.

August approvals for remortgaging were 27.8% down year-on-year, at 47,765 and at their lowest since early 2001.

Net mortgage lending (gross lending minus repayments and redemptions) rose by £2.1 billion last month but the rise was less than half the monthly increase over the six months to the end July.

Meanwhile, approvals for equity withdrawal and buy-to-let loans were 35.3% lower than in August 2007.

The Association expects the slide in approvals to continue in response to the downturn in the property market, economic pressures and tighter lending criteria but it does point out that August figures may have been depressed by uncertainty about stamp duty.

BBA members fund around two-thirds of the UK’s mortgage lending and have been cutting rates regularly over the past few weeks.

However, the turmoil on Wall Street last week threatens their funding because the collapse of Lehman Brothers and uncertainty about other huge financial institutions has made banks reluctant to lend to one another again.

As a result, the competition that had begun to return to the UK mortgage market could wither and rates could rise, regardless of any downward movement in the Bank of England’s base rate.

Discuss this in the Finance Markets forums

Story link: Approvals for new mortgages plunge 64%