Mortgage approvals hit 20-month low

23 December 2010

The British Bankers' Association (BBA) has reported mortgage approvals for house purchases sank to a 20-month low in November.

Mortgage approvals fell from 30,689 in October to 29,991 last month, down from a peak of 45,740 in December 2009.

On a year-on-year basis, mortgage approvals were down 31.7% in November and almost half the average monthly level of 58,513 seen since 1997.

Meanwhile, net mortgage lending amounted to just £1.46 billion in November - the lowest level since August 1999.

"Remortgaging with banks was strong in November as borrowers chose to replace maturing fixed-term mortgages," commented BBA statistics director, David Dooks.

"Credit card purchases were fairly strong in November in line with retail sales but repayments also kept up, so the annual growth rate for credit card lending was slightly lower," he said, adding: "Lending to non-financial companies showed its first net increase since February, partly reflecting finance for takeover activity."

Howard Archer, chief UK and European economist at IHS Global Insight, said he thought the BBA data pointed to the housing market ending 2010 very much on the back foot, "where we expect it will remain for much of 2011".

Archer added: "Given that house prices have already fallen by some 3%, we believe that they will fall by around 7% in 2011. In our view, the housing market has got little going for it at the moment, apart from low mortgage rates - and that is if you can get a mortgage."

He said that critical to the development of house prices over the coming months will be the amount of houses coming on to the market, mortgage availability, and how well the economy and jobs hold up as the fiscal squeeze increasingly kicks in.

This article was written for Interactive Investor


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