Slump in mortgage approvals last month

Slump in mortgage approvals last month

British Bankers' Association

Gross mortgage lending of £7.2 billion in June was below the six-month average and reflected subdued activity in the housing market, the British Bankers’ Association (BBA) has reported.

There were 51,610 mortgage approvals last month worth £6.5 billion, the lowest number of approvals since 1997, when BBA records begin.

The banks reported 26,269 approvals for house purchase worth £4.2 billion, the lowest number since January 2009. There were just over 14,000 approvals for re-mortgaging, worth £1.9 billion in June.

However, the banks’ net mortgage lending grew by 0.9% in the year to June.

“Public holidays and wet weather put a damper on mortgage approvals in June and demand for unsecured household borrowing was also low,” said David Dooks, the BBA’s statistics director.

“Paying off loans or overdrafts and building up deposits is the current consumer ambition.

“Business output remains weak, so demand for finance is subdued, with companies tending to delay investment and concentrate on reducing their bank debt.”

Nick Hopkinson, director of PPR Estates, said: “This month’s downbeat assessment of the mortgage market by the British Bankers’ Association (BBA) marks an almost contrarian moment of honesty from the sector. Mortgage and commercial lending continue to shrink while savers desperately struggling to beat inflation have put almost 60% more so far into their cash ISAs than last year.

“Stocks and equity-related investments remain a high-risk roller-coaster for all but the professional investor and mortgages are being severely rationed so most savers have little alternative than an ISA if they don’t want to risk losing all their money these days. Depressingly however most ISAs are guaranteed to lose you money after inflation has had its way but at least you’ll be going financially backwards a little slower.

“House prices will remain under downward pressure for the foreseeable future while the banks struggle to hide their massive losses from the pre-2008 property bubble. Only the millionaire-driven market in Prime London houses will buck this price trend as a separate bubble grows amongst international buyers seeking a ‘safe haven’ investment.

“While this will mask the national figures, it will be of no help to most parts of the UK’s struggling housing market till the credit crunch unwinds properly. Nobody really knows how long this will be – my guess is a lot longer than most people may wish.”