Home loan approvals collapse by 70 per cent

The scale of the crisis in the property market was revealed in stark detail yesterday with the publication of the latest figures on mortgage approvals from the Bank of England.

Approvals for new home loans fell by almost 70 per cent to a mere 36,000 in June, compared with the 114,000 home loans advanced in the same month last year. It follows similar figures from the British Bankers Associat-ion, whose figures exclude the building societies.

The number of home loans has fallen every month since the beginning of the year. June's approvals were down by 12 per cent on the already low 41,000 seen in May. New funding for mortgages was also way down – at £5bn, it represents less than a third of the £17.3bn lent last year. The number of approvals is about 40 per cent below the nadir witnessed during the housing crash of the early 1990s.

An increase in credit card balances suggests consumers are continuing to try to plug the holes in budgets through short-term unsecured debt.

The credit crunch continues to restrict the flow of finance going into the market as banks try to rebuild their capital posit-ions and face the virtual closure of the mortgage-backed securities market.

Anecdotal and survey evidence suggests that the demand for new mortgages is also depressed, primarily as buyers bide their time in the expectation that property prices will fall further.