The number of new mortgages approved by British banks slumped in September as confidence con-tinued to drain from the UK housing market.
The British Bankers' Association (BBA) reported that just 52,685 new mortgages were approved last month, a year-on-year fall of 27 per cent. The figure has not been this low for seven years.
Five rises in UK interest rates since August last year, combined with fears of a housing market crash, have put many would-be homebuyers off taking the plunge – a situation that has not been helped by the recent crisis at the Northern Rock bank. In addition, it seems that the credit crunch affecting world money markets is making banks more reluctant to offer attention-grabbing mortgage deals.
"The slowdown in the housing market continues to worsen, with higher interest rates being the root cause," said David Stubbs, senior economist at the Royal Institution of Chartered Surveyors. "However, their impact is being magnified by the withdrawal of some mortgage products by banks and building societies, as the problems in financial markets persist."
An increasing number of pundits are now calling time on the UK house price boom, which has seen property values more than double since 2000.
"The market should continue to weaken as we approach 2008, and price growth should stall throughout the year," said Mr Stubbs.
The Council of Mortgage Lenders reported last week that the total value of mortgage lending had fallen for the third month in a row. At the same time, the International Monetary Fund warned that UK house prices had risen far faster than incomes and were in danger of suffering a US-style crash.