Mortgage approvals plummet to their lowest level for 18 months

Julian Harris
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MORTGAGE approvals plunged to their lowest number in a year and a half in June, according to Bank of England data released yesterday.

Only 44,192 loans for home purchase were waved through by lenders last month, down from 50,544 in May and significantly below economists’ forecasts.

While two extra bank holidays falling in June might have affected the figures, the data nonetheless shows the weakness in the UK’s housing market, analysts said.

“It indicates that underlying housing market activity is limited following a modest boost at the start of 2012 from first-time buyers looking to complete before the stamp duty concession ended on 24 March,” commented Howard Archer of IHS Global Insight.

Net mortgage lending shrank by £355m in June, itself the sharpest fall for 18 months.

“<a href="/house-prices">The housing market</a> also faces headwinds from poor credit availability,” added Citi in a note. “The average interest rate on new mortgages rose by a further seven basis points (bps) in June after rising 11 bps in May, and is now up by 42 bps since January.”

Consumer credit rose by £635m in June, yet Chris Williamson of Markit warned: “Prior to the financial crisis, such a weak quarterly increase in credit had not been seen since 1994.”