Mortgage approvals by banks for house purchase dived by 6% in a month in April and by 18% compared with the same month in 2010.
The figure of 29,355 was down from 31,205 in March and was a steep fall on the 35,840 mortgages approved in April 2010, according to the British Bankers’ Association. The falls are the worst since its records began.
Meanwhile, separate figures from HMRC showed that total house sales – including those bought without mortgages – were 7.6% lower in April than for the same month last year.
According to HMRC, there were 73,000 sales in April, compared with 79,000 in April last year – and compared with over 139,000 in April 2007.
The gulf between the BBA and HMRC figures go some way to showing just how many house purchases are now cash transactions. The BBA figures do not include mortgages lent by non-banks.
According to the BBA, remortgage approvals in April were also down, by 12% on the previous month and 7% lower than in April 2010, while approvals for equity withdrawal were ‘subdued’ at 22% lower than in April last year.
BBA statistics director David Dooks said: “Banks are still able to meet the need for home loans, even though demand remains weak.”
Howard Archer, chief economist at IHS Global Insight, said mortgage approvals are now running at just above half the average monthly level of 57,644 seen since 1997.
He said: “The relapse in mortgage approvals in April from an already low level reinforces our belief that modest falls in house prices are more probable than not over the coming months.”
David Brown, commercial director of LSL Property Services, was also downbeat. He said: “Mortgage approvals have fallen in number and in size over the last year and this is fundamental to the UK’s property market. Property transactions last month were at their lowest April level since 1995 and this was driven by the difficulty of obtaining mortgage finance for house purchases. Slow mortgage lending is at the heart of the current trends in the property market.”
Nicholas Leeming, business development director of property portal Zoopla.co.uk, said that the housing market is caught in a vicious circle.
He said: “Weak mortgage lending is causing the numbers of buyers to fall and falling demand from buyers is putting downward pressure on house prices. Downward pressure on prices is making owners reluctant to put their property on the market and lack of property on the market is deterring buyers. It’s a vicious circle, but it can be broken if the lenders want to tackle the problem and the key is to feed from the bottom up.
“First-time buyers need to be encouraged to take advantage of low prices by offering them finance that is appropriate to their situation. When there is more energy at the bottom of the market, the rest of the ladder can feed off it. But until the first-time buyer problem is addressed the property market will continue to bump along going nowhere fast.”
Simon Rubinsohn, RICS chief economist, agreed. He said: “The BBA highlights a lack of demand for mortgages as a key factor influencing the level of approvals at the present time. We would not disagree that it is one factor but the cost and availability of finance for first-time buyers remains the bigger problem in our view.
“Critically, the low level of transactions in the sales market is resulting in more activity in the private lettings markets where rents are continuing to increase as demand outstrips supply. In addition, it is having a bearing on high street sales with fewer property purchases resulting in less related spending on durable goods.”
David Whittaker, managing director of Mortgages For Business, said: “Overall consensus among the general mortgage borrowing population is ‘let’s wait and see’ so lending will continue to bump up and down for the foreseeable future.”