Mortgage approvals plunge to record low

Mortgage approvals have fallen to a record low in August while lending halves, the British Banking Association has said.

Overall, approvals for house purchases fell by 64 per cent in August compared to last year – a record low.

Net mortgage lending rose only by £2.1 billion in August; less than half the average rise over the previous six months, banks said.

BBA statistics director, David Dooks, said: "Falling property prices, economic pressures on households, tighter lending criteria and anticipation of the government's announcement on stamp duty all suppressed or delayed demand in August and will continue having an impact in the months ahead.

"Monthly fluctuations in consumer credit and deposits reflect the behaviour of families repaying as much as they spend on credit cards and using their current accounts for expenditure."

Personal deposit growth continued to be weak, the BBA added, and the annual growth rate declined by 0.7 per cent to four per cent.

Economist Howard Archer, from Global Insight, said: "Widespread expectations that house prices will continue to fall markedly for some considerable time to come is also significantly limiting housing market activity, as is heightened concern over the economic outlook and job prospects.

"Furthermore, the current financial sector turmoil is likely to deepen the pressure on housing market activity through further tightening credit conditions and exerting upward pressure on interest rates.

"Given these very poor fundamentals for the housing market, the recently announced government measures to support the housing market are very unlikely to have any significant impact in stabilizing activity or prices."