Mortgage approvals stay near decade lows |
The number of Mortgage approvals remained close to ten years ago lows in March while rates on new home loans were little changed despite a cut in official interest rates, Bank of England data showed on Wednesday.
The Bank said the number of mortgages approved for house purchase fell from 74,000 to 72,000 in March, broadly similar to the level in recent months, but nearly 40 per cent lower than a year earlier.
Net mortgage lending was stable at £7.4bn – well below the previous six-month average – while the breakdown between different types of lenders showed the sharp contraction in lending by specialist lenders most dependent on wholesale market funding.
The numbers confirm the effect that strains in money markets are having on the cost and availability of mortgages, coming a day after the bank First Direct stopped offering new mortgage lending and other lenders raised the rates charged to existing customers.
The weak housing market also appears to have impacted people from borrowing against the value of their home (also known as secured loans). The Bank said housing equity withdrawal fell from £11bn to £7.3bn in the fourth quarter of 2007, which George Buckley, economist at Deutsche Bank, noted was the lowest level as a proportion of post-tax income since the start of 2005.
However, growth in consumer credit rose sharply from £0.9bn in January to £2.4bn in February – driven by the biggest increase in personal loans and overdrafts on record since 1989.
Analysts suspected that households could be switching to more expensive unsecured borrowing – either to replace mortgage finance or simply to sustain spending – which might explain the recent resilience of retail sales.
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Added on 05/04/2008 11:40:37
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