Mortgage approvals at lowest level since 1997 as banks conserve funds

the housing market is unlikely to get any respite soon from lending-weary banks, figures released yesterday suggest. Mortgage approvals fell to the lowest since at least 1997 in November, according to statistics from the British Banking Association (BBA).

Mortgage lenders also declinedto pass on the Bank of England's interest-rate cuts in full, analysts said, and screened potential borrowersmore closely, as they struggled to meet new requirements on balance sheet funding.

Banks granted 17,773 loans for house purchase, down 61 per cent from the same month last year, the BBA, which represents the UK's biggest banks, said. The number of home loans was 20,767 in October, the BBA added.

While the Bank of England has reduced interest rates to their lowest level since 1951, banks that have been stung by the global financial crisis are reluctant to lend against houses as their value declines, and potential buyers are concerned about losing their jobs in the recession.

The situation has led to a fall in house prices, which had long been fuelled by deals like 100 per cent – and in some cases even 125 per cent – mortgages that many lenders offered until mid-2007. Mortgage approvals are now barely one third of the average level at the peak of the housing market in 2007, the data showed.

The news spells further gloom for house prices, which are 15 percent lower than a year ago, and continues a stream of bad data that has led many economists to expect the Bank of England to cut interest rates to a record low of 1 per cent next month.

"The outlook for the housing market remains bleak," said Howard Archer, chief European and UK economist at the research firm HIS Global Insight. "Ongoing very tight credit conditions, still relatively stretched housing affordability on a number of measures, faster rising unemployment, muted income growth, widespread expectations that house prices are likely to fall a lot further, and an unwillingness of many people to commit to buying a house when the economic outlook and job prospects look so bad, form a powerful set of negative factors weighing down on the housing market."

Underlying net mortgage lending showed its weakest monthly change since April 2001, rising by £2.9bn in November, down from October's £3.3bn rise.

The BBA's statistics director, David Dooks, blamed part of the drop on banks and prospective home-buyers pausing to take stock after the Bank of England slashed interest rates by 1.5 percentage points in November.

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Guru Careers: Software Developer / C# Developer

    £40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

    Neil Pavier: Management Accountant

    £45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

    Sheridan Maine: Commercial Accountant

    £45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

    Laura Norton: Project Accountant

    £50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

    Day In a Page

    Abuse - and the hell that came afterwards

    Abuse - and the hell that follows

    James Rhodes on the extraordinary legal battle to publish his memoir
    Why we need a 'tranquility map' of England, according to campaigners

    It's oh so quiet!

    The case for a 'tranquility map' of England
    'Timeless fashion': It may be a paradox, but the industry loves it

    'Timeless fashion'

    It may be a paradox, but the industry loves it
    If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

    Could have done with Osama bin Laden staying alive?

    Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
    New exhibition celebrates the evolution of swimwear

    Evolution of swimwear

    From bathing dresses in the twenties to modern bikinis
    Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

    Sun, sex and an anthropological study

    One academic’s summer of hell in Magaluf
    From Shakespeare to Rising Damp... to Vicious

    Frances de la Tour's 50-year triumph

    'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
    'That Whitsun, I was late getting away...'

    Ian McMillan on the Whitsun Weddings

    This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
    Kathryn Williams explores the works and influences of Sylvia Plath in a new light

    Songs from the bell jar

    Kathryn Williams explores the works and influences of Sylvia Plath
    How one man's day in high heels showed him that Cannes must change its 'no flats' policy

    One man's day in high heels

    ...showed him that Cannes must change its 'flats' policy
    Is a quiet crusade to reform executive pay bearing fruit?

    Is a quiet crusade to reform executive pay bearing fruit?

    Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
    The King David Hotel gives precious work to Palestinians - unless peace talks are on

    King David Hotel: Palestinians not included

    The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
    More people moving from Australia to New Zealand than in the other direction for first time in 24 years

    End of the Aussie brain drain

    More people moving from Australia to New Zealand than in the other direction for first time in 24 years
    Meditation is touted as a cure for mental instability but can it actually be bad for you?

    Can meditation be bad for you?

    Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
    Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

    Australia's first-ever Eurovision entrant

    Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine