New mortgages hit record low » Bill payments » 24dash.com

The number of mortgages approved for house purchase dived by 23% during June to hit a new record low, figures showed today.

Just 21,118 loans were approved for people buying a property during the month, 66.9% fewer than in June last year and the lowest figure since the British Bankers' Association began collecting the data in 1997.

The amount advanced by lenders also continued to fall during the month, with net lending, which strips out redemptions and repayments, dropping to just £3.85 billion, its lowest level since December 2001.

BBA director of statistics David Dooks said: "Another record low number of mortgages approved by the banks for house purchase means that the whole market is likely to be at its least active since the early 1990s."

The mortgage market is coming under dual pressures from the housing market downturn and the problems caused by the credit crunch.

Falling house prices are causing people to put plans to move on hold, while those who do still want to go ahead with a purchase are struggling to raise the finance they need.

But loans approved for people remortgaging held up better during the month, with 59,637 mortgages approved for homeowners switching to a better deal, accounting for a record 55% of all approvals.

The figure was also only slightly down on the 62,637 approvals for remortgaging in May, although it was still 13% below June 2007's level.

The value or mortgages approved for people moving continued its downward trend, falling for the fifth month in a row to just £3.3 billion in June, the lowest level since January 1999 and 66% below the value of pipeline business 12 months earlier.

Credit card borrowing remained subdued during June, with £7.3 billion spent on plastic, in line with the recent trend. Consumers also repaid more than they spent, continuing the pattern seen during the past two years.

But despite repaying £7.6 billion during the month, once interest and charges were taken into account, credit card lending still rose by GBP186 million. This was down on the jump of £495 million seen during the previous month.

People borrowed £2.37 billion through personal loans during the month and around £200 million through overdrafts.

Once repayments were taken into account, outstanding debt in this area rose by just £76 million - less than half of the average rise of £200 million seen during the past six months.

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, said: "The continuing lack of availability of mortgage finance is proving a major drag on the level of property transactions and is increasingly being felt in the real economy."

Howard Archer, chief UK and European economist at Global Insight, said:
"The BBA data graphically highlights that housing market activity continues to be throttled by stretched affordability and tight lending conditions.

"Meanwhile, it seems unlikely that the Bank of England will cut interest rates, in the near term at least.

"Indeed, it is very possible that the Bank of England's next move could be to raise interest rates, which would clearly be very bad news for the housing market."