Mortgage lending slumps to nine-year low

The Bank of England said the number of home loans has plummeted from 85,000 in October to 77,000 in November, the lowest since September 1995.

Evidence from the Bank confirms a loss of confidence for prospective buyers and points to continuing price falls into 2005.

The cooling of the housing market is confirmed by the British Bankers' Association, which echoed the view of most economists that interest rates are unlikely to rise anytime soon.

City forecasters agree that the next MPC decision should result in a downward move for interest rates, supported by a slowdown in consumer spending and drop off in new borrowing.

A lesser amount being spent on credit cards combined with less use of overdrafts and personal loans, suggests people are fed up with taking on debt.

Uncertainty in interest rates towards the end of last year has further influenced consumer willingness to spend, after five rate rises since November 2003.

Today's rate of approved mortgages compared to 2003 exposes a 43 per cent drop off, exposing the worse fall than any in the housing crash of the 1990s.

However, the Bank did report that total lending, not just for mortgages, grew by £7.8 billion in November - or 0.8 per cent, representing £0.6bn weaker than the increase in October.

The total value of loan approvals was £19.9bn, indicating larger but fewer mortgages for those buyers prepared to deal.

First-timers entering the market remain at a base low despite buyer optimism at the beginning of this year.

According to the Financial Times, property websites showed the proportion of those expecting prices to fall this year fell from 72 per cent in November, to 65.8 per cent in December.

Both and said buyer requests for house details rose 8 per cent between November and the end of 2004.


6th January 2005

Related News

Latest News