Mortgage approvals plummet by 38%

The number of mortgages approved has fallen for the seventh month in a row, to the lowest level for nearly five years, figures have shown.

According to the British Bankers' Association (BBA), 40,201 home loans were granted in December.

The figure represents a 38% fall from the 64,563 new loans approved in December 2003.

Gross mortgage lending reached £14.2bn in December, 3% lower than November and 10% lower than in December 2003.

Mixed picture

December is usually a slow month, but as approvals were very low, BBA expects the market to remain subdued.

"This time of year sees a seasonal weakness in loan demand, but with approval volumes running well below those in the same month a year earlier, mortgage lending is expected to remain relatively subdued in the near-term," said David Dooks of the BBA.

Figures from Nationwide, released on Thursday, offered more comfort to those concerned about a property downturn.

Nationwide said it saw indications that "sentiment may be about to turn positive" and the market could stage a revival.

It said house prices rose 0.4% in January, reversing a modest fall in December.

However, other analysts said Nationwide was being too optimistic.

Ed Stansfield of Capital Economics, a well-known market doomster, said: "Nationwide has suggested that a soft landing is on track, but it's still too early to draw that conclusion."