Mortgage approvals down 27%, says BBA

Click to follow

Britain's mortgage lenders have had their thinnest September in seven years, according to the British Bankers' Association.

The BBA reported that the number of house purchase approvals dropped by 27 per cent in September to 52,685, from 72,155 last year. This follows a similarly weak performance in August, when approvals fell by 14 per cent on the year.

The BBA put the decline down to the Northern Rock debacle, the credit squeeze and five interest rate increases in 15 months. Of comfort to the banks is that house price inflation meant the value of the lending fell by only 21 per cent, or £5.8bn.

David Dooks, the BBA's director of statistics, said: "Lower amounts of new mortgage lending and fewer loans approved for house purchase signal a weaker outlook for the mortgage market, particularly if loan supply reduces in the aftermath of the recent financial markets' difficulties and borrowing costs remain at current levels."

The figures come in the wake of warnings from the IMF and the Bank of England that parts of the UK's property market may be vulnerable to further shocks to the financial system. Some lenders are tightening their criteria for lending, and Ernst & Young's Item Club economists have warned that house prices would stall next year. The Halifax index shows quarterly house price growth falling from 4.1 per cent in the last quarter of 2006 to 0.9 per cent in the third quarter of this year.