Bank Mortgage Lending Falls By 20%
The British Bankers Association (BBA) said that in May, the number of new approvals for mortgages to home buyers fell to just 28,000.
This is a drop from 20% in just one month and 56% below May last year.
The BBA said the number of new approvals was the lowest since record began in 1997 and warned that the market remains weak.
“Measures were lower mortgage activity in May as a result of tighter lending criteria and economic pressures on households,” said David Dooks, BBA.
“Only remortgaging business is the conclusion, where people need or want to take advantage of agreements with other lenders,” he added.
BBA members represent about two-thirds of total mortgage lending in the UK.
Contraction
The UK housing market is undergoing a rapid and unprecedented decline in activity and sales.
The supply of mortgage funds, which largely comes from lenders in international financial markets, has been largely turned off due to the continued credit crunch that began almost a year ago.
Many participants in the real estate market, as house builders, mortgage lenders, house builders, realtors and experts have been telling the same story, with widespread predictions that sales will fall between 35% and 45% in the course of 2008.
The effect has been that housing prices have fallen in recent months, with many experts now expect a fall of over 10% at the end of the year.
Mortgage approvals are widely seen as a good indicator of sales in the coming months.
The BBA figures suggest the most dramatic contraction in loans so far.
However, their data does not include the construction of societies. Figures for all lenders will be published by the Bank of England on June 30.
‘Deep correction’
Howard Archer, chief UK and European economist at Global Insight, said: “More data on the housing market, much more disturbing news that raise concern that we are in for a long, deep correction in the market housing.
“The BBA data graphically emphasized that the activity in the housing market is being throttled by stretched affordability and tight lending conditions.
“Very low activity in the housing market seems certain to feed through to further depress already significantly weaken house prices.