Mortgages Uncovered

Mortgage approvals against house purchases have dropped to a new low in June, the fall was 66.4% compared with the same month last year, as figures from the British Bankers’ Association (BBA) show.

This annual fall is the biggest since BBA records started in September 1997 and shows that the continued downturn in the housing market is accelerating as lenders continue to restrict the granting of mortgages.

These figures come just a day after our government figures showed that the number of UK homes changing hands went down by 50% in June, highlighting the continuing difficulties that are faced by estate agents, homebuilders and retailers.

Director of statistics David Dooks from the BBA, commented that another record number of low mortgages that banks approve for purchasing houses will mean that the entire market is to become it’s least active since early 1990.

Although despite the decline in the amount of mortgage approvals, total lending rose by 3.8 billion in June which is an increase of 12% from last year’s figures. However, this is still the weakest rise since October 2007.

A downturn in the property market always feeds through to household finances as people are becoming more wary of spending on credit cards, according to the BBA. So this means that the pressure on household finances is starting to reflect in lower customer borrowing and personal loans and overdrafts are being cut back.

Credit-card borrowing remained subdued in June 08, with 7.3 billion spent on plastic, which is in line with the recent trend. Consumers have also repaid more than they have spent which continues the pattern of the past two years.