Mortgage approvals hit the skids

The number of mortgage approvals fell by more than 40% in November, compared to the same month last year, latest figures have revealed…

The massive slowdown in lending shows that would-be buyers have been put off by high interest rates and have not been asking for cash. It also demonstrates that, if they do apply, lenders are being stricter about doing business with them.

In addition, fewer properties have been coming on to the market because homeowners have been reluctant to move, particularly at this time of year.

The British Bankers’ Association said there were 44,811 mortgage approvals for home purchases last month. That was slightly up on October’s 44,321 – but 43.5% down on November 2006. Net mortgage lending continued to soften, rising by £4.3bn over the month, compared to a £4.8bn increase in October. That was also well down on the six-month average increase of £5.5bn.

BBA Statistics Director David Dooks said: “Mortgage activity is notably lower than this time last year and, as we expected, lending has begun to slow down. Judging by the significantly lower number of mortgage approvals in October and November – partly resulting from lower demand, partly from tighter supply – the market is likely to continue slowing in the coming months.”

Most house price surveys have been showing a cooling in the market as rate rises and the worsening economic outlook take their toll on sentiment. The Bank of England cut the cost of borrowing by 0.25% to 5.5% earlier this month, in an attempt to help shore up the economy in the wake of the global credit crunch.