Mortgage Approvals Drop Again
April 23rd, 2008 by 
Guy
The credit crunch has been blamed for a further slump in mortgage approvals by the UK’s biggest lenders.
The British Bankers’ Association stated there had been just 35,417 new mortgages approved for house purchases in March, 18% lower than the previous month February.
They stated that approvals were down 46% on March 2007 and was the lowest monthly figure since September 1997.
A BBA spokes person said that all lending,not just mortgages, was being restricted by the lack of funds available.
“The consequences of low banking sector liquidity show up clearly in March data; reduced product ranges and tighter criteria resulted in slower mortgage lending and significantly fewer loan approvals,” said David Dooks of the BBA.
“Pressures on personal finances are also constraining demand, not only for mortgages, but also for personal loans and borrowing on cards.”
The members of the BBA account for about 70% of all mortgage lending in the UK.
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The BBA said that in March the gross value of all new mortgages handed out that month, including re-mortgages and equity withdrawal, was 15% down on a year ago.
That is likely to continue as approvals for remortgaging also fell in March.
All together, the total number of mortgages approved fell to 129,300, the lowest level since September 2000.
This week, the Bank of England announced plans to pour at least £50bn into the banking system to free up frozen interbank lending.
This money however will not be used directly to fund new mortgage lending.
The banks hope that lending between financial institutions becomes easier, more money will be made available to borrowers through out the year.
“The tightening in the credit crunch is continuing to take its toll on the residential property market,” said Simon Rubinsohn of the Royal Institution of Chartered Surveyors.
“The Bank of England’s latest ’swap’ arrangement with the banking sector should help provide a little more liquidity for lenders, but is not going to turnaround the current challenging environment overnight,” he added.
When the mortgage market improves, lending is not going to be on the generous terms as seen in the past that were being offered up to the end of last year, such as mortgages worth 100% plus.
The result being that minimum deposits of 10% are likely to become the norm for the foreseeable future, along with higher rates of interest for fixed and tracker-rate loans.
Posted in Mortgage news | 