October new mortgage approvals fall to record low

Mortgage approvals for house purchases fell during October, having seen a slight rise in September.

Figures from the Bank of England show that 32,000 new home loans were approved during the month, despite the 0.5% cut in the base rate at the beginning of October.

The decline takes the figure below the level seen in August and the value of new home loans also plummeted, to £3.9 billion or 60% year-on-year.

October net mortgage lending (which takes into account repayments and redemptions), fell 70% on September to £459 million, or a staggering 94% year-on-year.

The collapse echoes concerns voiced by Sir James Crosby, author of the Government commissioned Crosby Report, earlier this month.

He has warned that net new mortgage lending may fall below zero next year, which would occur if repayments and redemptions exceed the value of new mortgages.

The Building Societies Association has also published October figures, showing that net lending by its members was up slightly on September but down 45% year-on-year, at £413 million.

Meanwhile, leading house price indices are showing falls in the average value of a UK home of between 10% and 15%.

The low level of mortgage approvals for new purchases seen in October indicates that the downturn has further to run, despite Nationwide reporting that the slide levelled slightly in November, with the average price of a home declining just 0.4%.

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