Mortgage approvals down as US property crash spreads
Mortgage approvals a key guide to the health of the UK property market fell in December, according to Bank of England data released today.
In total 226,000 mortgages were approved in December, worth £25.4 billion down from 236,000 mortgages in November worth £26 billion.
The fall was fuelled by a drop in mortgage deals approved for house purchases as banks tighten their lending criteria and expectations of house price correction mount.
Some 73,000 mortgages were approved for homebuyers last month, worth £10.2 billion - compared with a six-month average of 100,000. In late 2006 homebuyers approvals topped 130,000.
However, remortgage activity grew for a second month, with up to 97,000 deals clearing worth £12.6 billion.
Net mortgage lending rose £8.6 billion, while lending on credit cards, loans and over drafts was up just £0.6 billion half November's growth despite Christmas spending kicking in.
Ian Kernohan, economist at Royal London Asset Management, said the figures were evidence of the US property slump spreading to the UK.
He said: "The latest mortgage approval numbers indicate the current housing slowdown is more pronounced than in 2005 and bodes ill for the next set of retail sales data.
"The fallout from the US housing crisis is spreading to the UK via a general squeeze on credit availability and the MPC will seek to offset some of this effect by cutting rates again next month."
The Royal Institution of Chartered Surveyors (Rics) concurred, saying the fall in borrowing was due to lenders making it harder to secure a loan.
"The combination of reduced loan-to-value ratios and the more discriminating policy of lenders is clearly having an impact on the availability of finance for property purchases," a Rics spokesman said.
"There a few signs of immediate relief on this front and those attempting to get on the property ladder are likely to find the environment challenging for the foreseeable future."