UK mortgage approvals slump 61 pct to fresh low

Wednesday, December 24, 2008

The number of mortgages approved for home purchase in Britain slumped to a fresh record low in November, with the seasonally-adjusted number falling to 17,773 -- almost 61 percent down on the same time last year.

Mortgage approvals are now barely one third of the average level at the peak of the housing market in 2007, the data from the British Bankers' Association showed.

The news spells further gloom for British house prices, which are 15 percent lower than a year ago, and continues a stream of bad data that has led many economists to expect the Bank of England will cut interest rates to a record low of 1 percent next month.

Underlying net mortgage lending showed its weakest monthly change since April 2001, rising by 2.9 billion pounds ($4.28 billion) in November, down from October's 3.3 billion rise.

BBA statistics director David Dooks blamed part of the drop on banks and prospective home-buyers pausing to take stock after the Bank of England slashed interest rates by 1.5 percentage points in November.

"The 1.5 percentage point November reduction ... caused lenders to re-assess product ranges and borrowers to re-consider future borrowing costs, so consequently there was another drop in market activity," he said.

The average value of a new mortgage for home purchase was 117,000 pounds, 23.7 percent lower than a year ago and greater than the percentage fall in house prices recorded in separate data from major mortgage lenders for last month.

Source: UK.Reuters.com