UK mortgage approvals reach a new low

UK mortgage approvals have fallen to their lowest levels as the aftershocks of the housing slump are being felt, with banks granting 42,000 loans compared to 58,000 just two months ago even though economists had predicted a figure close to 51,000.

The fact that approvals have fallen so drastically in the space of a month, reveals the true extent of the volatility and slowdown of the UK housing market.

Bank of England (BoE) figures released yesterday revealed that the value of mortgages in the month of May 2008 is £2.34 billion which is nearly half that of May 2007 which recorded a healthy £4.59 billion worth of approvals.

BoE figures also showed that re-mortgage approvals have fallen by 10 percent between April and May.

Mervyn King, the Bank of England’s Governor, has forecast that inflation, which is currently running at 3.3 percent, may break the 4 percent barrier.

However, this will only destabilise the UK housing market further so any resurgence in the market seems to be linked with inflationary pressures and consumer confidence, as even the most determined buyers are being put off by headlines and the difficulty in raising finance on acceptable terms.

In the meantime, UK house prices have continued to fall, Halifax reported a near 6 percent drop in the last quarter.

It has also been a very tough time for the industry as a whole as house builder’s such as Taylor Wimpey have seen their share values slashed, whilst the UK’s largest mortgage lender HBOS has turned to its shareholders in order to furnish their balance sheets.

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