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.

PROMOTED VIDEO
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

    Selby Jennings: Oil Operations

    Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

    The Jenrick Group: Night Shift Operations Manager

    £43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...

    SThree: Trainee Recruitment Consultant - LONDON

    £20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

    Day In a Page

    Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

    'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

    Yazidi girls killing themselves to escape rape and imprisonment
    Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

    Ed Balls interview

    'If I think about the deficit when I'm playing the piano, it all goes wrong'
    He's behind you, dude!

    US stars in UK panto

    From David Hasselhoff to Jerry Hall
    Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

    Grace Dent's Christmas Quiz

    What are you – a festive curmudgeon or top of the tree?
    Nasa planning to build cloud cities in airships above Venus

    Nasa planning to build cloud cities in airships above Venus

    Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect
    Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

    Clocks, rifles, swords, frogmen’s uniforms

    Surrounded by high-rise flats is a little house filled with Lebanon’s history
    Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

    Four months after the bombardment, Gaza’s wounds are yet to heal

    Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
    Gastric surgery: Is it really the answer to the UK's obesity epidemic?

    Is gastric surgery really the answer to the UK's obesity epidemic?

    Critics argue that it’s crazy to operate on healthy people just to stop them eating
    Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

    Homeless Veterans appeal: Christmas charity auction

    Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
    Pantomime rings the changes to welcome autistic theatre-goers

    Autism-friendly theatre

    Pantomime leads the pack in quest to welcome all
    The week Hollywood got scared and had to grow up a bit

    The week Hollywood got scared and had to grow up a bit

    Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
    From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

    Panto dames: before and after

    From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
    Thirties murder mystery novel is surprise runaway Christmas hit

    Thirties murder mystery novel is surprise runaway Christmas hit

    Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
    Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

    Anne-Marie Huby: 'Charities deserve the best'

    Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
    The botanist who hunts for giant trees at Kew Gardens

    The man who hunts giants

    A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there