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Mortgage approvals plunge in March

23/04/2008

Mortgage approval levels were down 46.2 per cent in March compared to last year, lending figures show.

Figures from the British Bankers' Association (BBA) for high street lending show 35,417 mortgages were approved for home purchases during the month, down by 46.2 per cent on a year ago. Remortgage approvals fell 7.9 per cent, to 60,503.

The level of approvals was at its lowest since September 2000.

In total £15.6 billion worth of mortgages were approved - a fall of 14.7 per cent on a year ago.

The fall in approvals is squarely being put down to the credit crunch, as banks find raising funds on the money markets harder and more costly and pass on costs in the form of higher rates and higher deposits to borrowers.

"March's BBA data indicate mortgage activity is being pummelled by a toxic combination of stretched affordability and very tight lending conditions," said Howard Archer, chief UK economist at Global Insight.

"The low level of mortgage activity is not only a consequence of slowing demand for houses due to the elevated affordability pressures facing potential house buyers, but also increasingly due to very tight credit conditions leading to markedly fewer and more expensive mortgages being available.

"Furthermore, potential house buyers are now having to provide higher deposit levels, which is a particularly major problem for first-time buyers."

The size of the average mortgage is now £158,000 and the average remortgage is at £146,000.

"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 BBA statistics director David Dooks.

"Pressures on personal finances are also constraining demand, not only for mortgages, but also for personal loans and borrowing on cards."

The BBA data also shows the UK's credit card bill grew 6.5 per cent to £31.4 billion, as repayments fell a touch, loan lending was stable, and UK overdrafts grew by £200 million.