House purchase loans drop 33%

| March 27, 2008 | 0 Comments

A report from the British Bankers’ Association (BBA) highlights a crisis in confidence in the UK property market.

In February, 33% fewer loans were approved by its members for house purchases than in the same month of 2007.

The figure was down to just 43,870 mortgages (worth £7 billion) and compares with the six-month average of 47,402 (£7.4 billion).

As the credit squeeze continues, banks cannot secure all the funding they need for mortgages.

According to Moneyfact, 19 lenders contacted the financial website on one day alone to withdraw products or place restrictions on their loans.

In addition, lenders are commonly withdrawing mortgage deals that find their way into the “best-buy” tables because they cannot fund the high demand they attract.

Only yesterday, Chelsea Building Society ceased to sell its products through brokers for the remainder of this week.

However, while loans for house purchases have fallen, remortgages have risen. According to BBA figures 10% more remortgages were agreed in February that the same month a year ago.

Last month, the number of remortgages stood at 72,193, down on the 79,926 in January but above the 65,202 six-month average.

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, comments: “The modest pick up in mortgage lending in February . . . is unlikely to be sustained. Buyer enquiries (according to the latest Rics survey) have slipped back to the lows seen in the wake of the Northern Rock crisis and this trend is likely to persist through the spring.”

Meanwhile, the National Association of Estate Agents has reported that figures for potential homebuyers are at their lowest level for 20 years.

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