New mortgage lending down 67.1%

New mortgage lending down 67.1%

The Bank of England has reported that mortgage approvals for house purchases fell to 27,000 in November.

The record low represents a 67.1% decline on similar approvals for November 2007.

A month earlier in October, approvals fell by 1,000 (from September) to 32,000 and November’s figure is therefore 13% down month-on-month, ending a four-month period during which approvals for new home loans had remained fairly stable.

Meanwhile, remortgaging approvals fell to just 42,000 in November, down from 72,000 in October.

In terms of value, total mortgage advances fell for the tenth consecutive month in November, to £15.49 billion.

However, net lending, which takes into account redemptions and repayments stood at £740 million, compared with £477 million in October.

Mortgage approvals are seen as a good indicator of medium-term lending trends and November’s figures therefore support predictions that the UK property market slump will continue well into 2009.

They also give weight to the opinion of Sir James Crosby, author of the Government commissioned Crosby Report on the UK mortgage market, who has warned that net new mortgage lending may fall below zero this year.

This would occur if repayments and redemptions exceed the value of new mortgages and therefore does not mean that house sales would grind to a complete halt.

Sir James is keen to see the Government provide temporary guarantees for new mortgage-backed securities as a means of enabling lenders to finance their businesses by borrowing on the wholesale money markets.

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