New mortgages hit a record low

3:46pm Wednesday 23rd July 2008

The number of mortgages approved for house purchase dived by 23% during June to hit a new record low.

Just 21,118 loans were approved for people buying a property during the month, 66.9% fewer than in June last year and the lowest figure since the British Bankers' Association began collecting the data in 1997.

The amount advanced by lenders also continued to fall during the month, with net lending, which strips out redemptions and repayments, dropping to just £3.85 billion, its lowest level since December 2001.

BBA director of statistics David Dooks said: "Another record low number of mortgages approved by the banks for house purchase means that the whole market is likely to be at its least active since the early 1990s."

The mortgage market is coming under dual pressures from the housing market downturn and the problems caused by the credit crunch.

Falling house prices are causing people to put plans to move on hold, while those who do still want to go ahead with a purchase are struggling to raise the finance they need.

But loans approved for people remortgaging held up better during the month, with 59,637 mortgages approved for homeowners switching to a better deal, accounting for a record 55% of all approvals.

The figure was also only slightly down on the 62,637 approvals for remortgaging in May, although it was still 13% below June 2007's level.

The value or mortgages approved for people moving continued its downward trend, falling for the fifth month in a row to just £3.3 billion in June, the lowest level since January 1999 and 66% below the value of pipeline business 12 months earlier.

Credit card borrowing remained subdued during June, with £7.3 billion spent on plastic, in line with the recent trend. Consumers also repaid more than they spent, continuing the pattern seen during the past two years.

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