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BoE mortgage approvals down

BoE mortgage approvals down

Wednesday, 2 April 2008 12:00 AM

UK lenders approved 246,000 mortgages in February, as the number of deals given the go ahead to homebuyers fell to the second lowest level on record.

Bank of England figures show 73,000 mortgages for home buyers were approved in February, down almost ten per cent on November 2007.

Remortgaging approval levels also saw a fall to 111,000 deals approved worth £14.4 billion after recent solid performance.

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors (Rics), said as mortgage lenders stop lending - as First Direct did yesterday - and increase interest rates, activity in the housing market will slow.

Mortgage approvals remained little changed in February at 73,000. This is more than 40 per cent down from the highs seen in November 2006 and 25 per cent lower than in September last year.

Howard Archer, chief UK economist at Global Insight, said: "The weak mortgage approvals data from the Bank of England confirm the housing market was already under major pressure from the dangerous combination of stretched affordability and tighter lending conditions even before the recent escalation of the credit crunch.

"This has led to a further substantial reduction in the number of mortgages available and an increase in mortgage rates."

He added: "The likelihood is that the level of activity in the housing market will slip further over the coming months as mortgage lenders either (temporarily) close their doors to new borrowers or lift interest rates."

The UK's total mortgage debt now stands at £1,193.9 billion, while Brits owe £226.6 billion on personal loans, credit cards and overdrafts.

Furthermore, the Royal Institution of Chartered Surveyors (Rics) predicts worse is to come.

"The likelihood is that the level of activity in the housing market will slip further over the coming months as mortgage lenders either (temporarily) close their doors to new borrowers or lift interest rates," said Rics chief economist, Simon Rubinsohn.