Mortgage approvals fall to six-month low

Date:

Wednesday 29th September 2010

The volume of residential property mortgages approved fell to a six-month low last month reflecting lower activity in the housing market, according to fresh data released by the Bank of England.

A total of 47,372 mortgage applications were approved for property purchases in August, down from 48,346 in July - the fourth consecutive monthly fall.

Commenting on today's Bank of England mortgage approvals data, Simon Rubinsohn, RICS chief economist said: "Data released by the Bank of England this morning shows that transaction activity in the housing market remains very subdued. Indeed, the number of mortgage approvals in August slipped to their lowest level since February. Net mortgage lending actually rose sharply during the month but this was largely a reflection of a drop in the value of repayments on secured loans in August.

"Lack of availability of mortgage finance remains a key factor depressing housing market, although increasing concerns about the outlook for the economy may also be impacting adversely on buyer interest."

Additional research by the Council of Mortgage Lenders (CML) also reveals that gross mortgage lending declined last month - down 14% from £13.3bn in July to an estimated £11.4bn in August, and 6% from £12.1bn in August 2009.

This CML research shows the lowest August total since 2000 (£11.1bn). The fall in mortgage lending is a big blow to people seeking finance to buy property.

Bob Pannell, CML chief economist, said: "We face the prospect of a difficult second half of the year. However, the Bank of England is likely to keep interest rates at record lows for longer to support the economy. This will continue to alleviate payment pressures for many borrowers."

Speaking at RESI earlier this month, Mark Clare, group chief executive of Barratt Developments, criticised mortgage lenders for discriminating against new build homes, by offering lower loan-to-value mortgages on brand new properties compared to resales.