The number of mortgages approved for house purchase by the UK’s biggest banks rose slightly during September but was still 57 per cent lower than a year ago, the British Bankers’ Association said on Thursday.
On a month to month basis the figures show 23,422 loans were approved for purchases during the month compared to 21,342 in August and 53,694 last year.
The BBA said the current low level of approvals was not surprising. The annual fall in mortgage approvals demonstrates the continued weakness of the housing market, which has seen sales and prices fall steadily in recent months.
”Compared to a year ago, the mortgage environment has changed significantly, with supply restricted as a consequence of the situation in financial markets and demand at a much reduced level,” said the BBA’s statistics director, David Dooks.
”Pressure on household budgets, the slowing economy and fragile consumer confidence are suppressing consumer appetite for unsecured borrowing, but personal deposits across the high street banks held up.”
The annual fall in mortgage approvals demonstrates the continuing weakness of the housing market with the lack of mortgage liquidity continuing to restrict activity.
Simon Rubinsohn, RICS chief economist commenting on the figures, said: “The slight month on month rise in September is consistent with the pick-up in new buyer enquiries in the RICS monthly housing market survey indicating that opportunist buyers are still on the look out for bargains.
“Many first time buyers have been denied access to the market, due to insufficient funds but the government’s rescue plan may go someway to kick start mortgage lending. However, as the country teeters on the brink of recession and the employment picture deteriorates, mortgage lending is unlikely to see a recovery in the near term.”
The slump in the mortgage market has surprised everyone with its intensity and severity. While there is little doubt that mortgage lending at the start of 2007 was abnormally cheap and a correction was due, the turnround has been brutal. the past year has seen the number of deals on offer shrink and become much more expensive, with borrowers expected to put down much larger deposits than before.
This has resulted in house sales down by more than half in the past year, and a report from the UK’s second largest lettings agent Your Move found that the number of people signing up for rented accommodation rose in September, with demand up 50 per cent year on year.
Growth in credit card borrowing was also weaker than it has been in previous months with the annual growth rate declining from 8.2 per cent to 6.8 per cent. Although borroweing on overdraft rose slightly, overall unsecured borrowing remeianed very subdued.
