House prices were yesterday forecast to plummet even further as mortgage approvals hit their lowest level since records began and below the level of the 1990s recession.
Data from the Bank of England showed that mortgage approvals for house purchases had plummeted to 42,000 in May from 58,000 in April. Mortgage approvals have now dropped 64 per cent year on year and 28 per cent month on month. The falls are far worse than analysts had expected.
“The level of approvals is just one third of the peak seen in late 1996 and by far the lowest seen since data began in 1986. Our base case has been for house prices to fall by 20 per cent over 2008-10, but the collapse in approvals suggests that a sharper drop may be on the way,” said Michael Saunders, economist at US bank Citigroup.
Meanwhile independent research house Capital Economics downgraded its forecast for UK growth due to the “dire” data.
It now expects 0.5 per cent GDP growth in 2009, down from its original 1 per cent forecast.
“With the housing slowdown gathering pace at a worrying speed – and the MPC unable to come to the rescue – a significant slowdown in the overall economy is looking inevitable,” warned economist Vicky Redwood.
Meanwhile, the Office for National Statistics said productivity, measured as output per worker, fell 0.1 per cent quarter on quarter at the start of 2008, taking annual productivity growth from 1.6 per cent to 0.6 per cent.