Page last updated at 10:49 GMT, Thursday, 27 March 2008

Bank mortgage approvals still low

Estate agent's window
The recent property slump is continuing

Bank mortgage lending to people who are moving home is still down by a third on the same time a year ago, said the British Bankers' Association (BBA).

The figures confirm the continuing downturn in the property market.

Banks lent 43,870 mortgages to home movers in February, slightly more than in January, but 33% down on last year.

People who do not move, but change their mortgages to more favourable deals, now account for nearly half of all new mortgages granted by banks.

Buyer enquiries have slipped back to the lows seen in the wake of the Northern Rock crisis
Simon Rubinsohn, Royal Institution of Chartered Surveyors

"In an environment of tightening lending criteria, re-mortgaging, either to fix, re-fix, or reduce borrowing costs, has been a clear influence on mortgage data in the first two months of this year, resulting in mainstream lenders picking up market share," said the BBA's statistics director, David Dooks.

Subdued

The UK housing market is going through a two-way squeeze.

Banks are finding it hard to raise funds on the financial markets because of the so-called credit crunch.

With less money to lend to home buyers they have been tightening their lending criteria, making it more expensive for borrowers to take out a loan and move, or buy their first home.

Meanwhile the rapidly rising house prices of the past few years have driven many would-be home owners out of the market, cutting the demand for loans.

"Buyer enquiries have slipped back to the lows seen in the wake of the Northern Rock crisis and this trend is likely to persist through the spring," warned Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors.

On Wednesday, Bank of England governor Mervyn King told MPs that bank mortgage rates were still roughly the same as they were last August, even though the Bank has cut its own interest rates to 5.25% from 5.75% since then.

"I would be surprised in a few years if house prices are markedly higher than they are now," Mr King said, repeating his view that the UK housing market will probably remain subdued for some time.


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