Mortgage Approvals Down Again
Mortgage approvals were at their lowest level in August since records began. A number of factors are keeping people out of the housing market, not least concerns over the economy and jobs. The hope is that the Bank rate will come down soon.
August saw a new low in the number of mortgages approved as the housing market shows no sign of emerging from its crisis.
Major banks failed to make any impression in the mortgage market despite some reductions in mortgage rates.
The British Bankers’ Association (BBA) reported that there were just 21,086 mortgage approvals in August – the lowest number since records began in 1997, and 64% down on a year ago. Net lending was up by £2.1bn in the month, but well below the increase seen in July of £4.8bn.
The word ‘dismal’ was used by City economists to describe these figures, but could offer no optimism for coming months. Around two-thirds of all mortgage lending in Britain is done by the BBA.
The glimmer of light is that the figures will be another prompt for the Bank of England to lower interest rates in the autumn, as Britain heads unrelentingly for recession.
The shortage of available mortgages has made buyers think long and hard about whether they should take the plunge, but the demand for large deposits, plummeting house prices and the state of the economy – in particular rising unemployment – has undoubtedly put them off. Figures from estate agents suggest that they are selling an average of just five properties per month.
David Dooks, statistics director at BBA said that falling property prices, money pressures in the household, tighter lending conditions and the Government’s delay on the stamp duty announcement all led to a reduced demand in August. Most of those factors will continue to suppress demand for months to come.
Although the Government raised the stamp duty threshold from £125,000 to £175,000 temporarily, it does not yet seem to have had the desired effect. The market is still difficult for first-time buyers to break into.
Economists say that stretched affordability and tight lending conditions are continuing to strangle the market. Most also expect house prices to continue to fall for some time yet.
