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Mortgage approvals hit new record low

Monday, 2 June 2008 12:00 AM

Mortgage approvals for house purchases fell to the lowest level on record in April, latest data from the Bank of England reveal.

Lending is now at almost half the level of 12 months ago.

In total there were 58,000 mortgages approved for house purchase - a key signal the property market is slowing - worth £8.3 billion.

This compares with 73,000 mortgage approvals in January and 115,000 in May 2007.

However, remortgage approvals rose 8,000 from March to 106,000 - but was still below the 118,000 recorded in January.

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors (Rics), said: "The latest weak data on mortgage approvals highlight the continuing problems facing borrowers trying to secure finance to purchase property.

"Lenders are continuing to tighten up on the conditions accompanying new loans making it hard for first-time buyers to take advantage of the modest fall in house prices seen over the part few months."

He added the weak data highlighted "very clearly the real problem facing not just the property market but also the wider economy.

"A collapse in transactions of this magnitude has major implications both for consumer spending and a wide range of ancillary industries."

Mr Rubinsohn added the Bank of England may be forced to cut interest rates to buoy the property market if the conditions do not improve.

The Bank of England data also reveal a slowdown in personal loan and credit card lending.

Consumer borrowing was limited to £0.9 billion in April, down from £1.2 billion in March.

Howard Archer, chief UK economist at Global Insight, said: "Going forward, consumer borrowing will be limited by tight lending conditions, while many people are likely to be increasingly keen to rein in their borrowing.

"Rising debt levels, low household savings rates and lower equity prices mean that there is a pressing need for many consumers to improve their finances."

He added: "There is also likely to be higher distressed borrowing over the coming months, as people struggle in the face of higher food prices and utility bills, as well as increased mortgage payments."

Daniel Barnes

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