Mortgage Approvals Hit New Low

Mortgage approvals hit a new low in May. This tends to indicate that house prices still have some way to fall before they recover. Some industry experts blame the lack of mortgage availability for the fall.

The Bank of England reported yesterday that the number of mortgage approvals in May fell to the lowest monthly figure ever recorded.

Since records began in 1993, there have never been fewer than the 42,000 mortgages approved in May. This figure is 64% less than the same month last year, when there was a peak figure of 116,000 approvals.

The figure was much lower even than the 71,000 of February – typically a quiet month in the year.

Of course, in many ways the plummeting number of approvals comes as no surprise given the state of the mortgage market, the credit crisis, and the rising cost of bills at home.

However, the severe drop in approval numbers indicates that there is no bottoming out of the downward mortgage market curve yet. Indeed, as a forecaster of where housing prices may go in the next few months, the approvals figure suggests that prices have a long way to fall yet.

One analyst, Global Insight, predicted that the fall in house prices will be 12% in consecutive years, 2008 and 2009. Using the Halifax house price index, that would mean a fall from the peak in August 2007 of £199,600 for the average house price to only £152,700 by the end of next year.

Further figures from the Bank show that remortgages also fell in May, down to 90,000 from 100,000 in April. Overall mortgage lending was £4.1bn in May, down from £6.2bn in April, and a six monthly average of £7.1bn.

People in the property industry feel that the fall in mortgage numbers should be blamed on the lack of mortgages available rather than a lack of buyer demand. With higher rates and fees, affordable mortgages are hard to find and potential buyers are left with little option but to stay put.

Searching for a mortgage is a task best achieved by experts such as mortgage brokers or advisers.