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Record lows for new home loan approvals

According to a recent report figures showing that new home loan approvals are at a record low are further evidence of the predicted slowdown in the housing market. The number of mortgages that were approved by the major banks during the month of December have plummeted compared to the previous year, and are the lowest on record according to the British Banker’s Association.

The number of new home loans that were approved in December fell by 38% compared to December of 2006, with just 42,088 approvals over the course of the month. The British Banker’s Association started to record this data back in 1997, and this is lowest number of home loan approvals on their records.

There was also a fall in the total amount advanced on mortgages for December, with a fall of nearly £1.5 billion compared to the previous month. With £15.1 advanced on mortgages the December figures reflected a fall of 22% compared to December of 2006. Industry experts state that these figures reinforce what many people have already realised – that there has been a marked weakening of the housing market.

The slowdown in the housing sector has been blamed on stretched affordability amongst consumers as well as on tighter credit conditions in light of the credit crunch.

One official stated: 'Mortgage lending weakened notably in the second half of 2007 as the credit crunch impacted on banks' ability to lend. At the same time, demand for mortgages also softened in the face of increased borrowing costs and lower disposable income. The combination of these factors is resulting in the marked market slowdown and weakness in house prices we are now seeing.'

Tom Smith
3rd February 2008

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