A new record has been set by mortgage lending for property purchase falling to a new low. The British Bankers Association (BBA) has stated that during May, numbers of mortgage approvals has dropped to 28,000. This is a drop of 20% since April and 56% drop since the previous year. This number of approvals is apparently the lowest since the BBA started recording data in 1997. “Measures of mortgage activity were lower in May as a result of tighter lending criteria and economic pressures on households, only remortgaging business is holding up, where people need or want to take advantage of deals with other lenders.” Said David Dooks of the BBA.
Apparently two thirds of the UK mortgage lenders are part of the BBA who are reporting that the UK property market is dealing with an unprecedented slump in sales. Due to the current credit crunch, a lot of the funds used for mortgages and provided by lenders and international financial markets have been stopped.
Many people in the property industry, such as builders, mortgage lenders, surveyors and estate agents are reporting the same bad news and sales are said to drop to between 35% and 45% over 2008.
These bad sales figures have led to house prices falling over the last few months with predictions of prices falling by more than 10% by the end of the year.
A good indicator of sales is mortgage approvals levels, but figures from the BBA show a contradiction in levels so far. This data does not include building societies which will alter results.
All mortgage lenders will provide data and these figures will be published by the Bank of England on 30 June. ”Deep correction” Howard Archer, chief UK and European economist at Global Insight, said “More housing market data, more very worrying news that heighten concern that we are in for an extended, deep correction in the housing market. “The BBA data graphically highlight that housing market activity is currently being throttled by stretched affordability and tight lending conditions. “Very low housing market activity seems certain to feed through to further depress already markedly weakening house prices.”