Loan approvals in the housing market reach a 3 year low

November 2007 was the 5th consecutive month whereby demand from new homebuyers continued to decrease, taking home loan approvals to their lowest in three years.

Bank of England figures showed that the number of new home loans agreed had dropped dramatically by 26% from a year ago, bringing the figure to 238,000. This figure also includes re-mortgages.

Mortgages for house purchase is regarded as the measuring stick for the general condition of the housing market, which alarmingly showed a 37% drop to 83,000. This is its lowest figure since January 2005.

Economists predict a continued lull in buyer interest over the next few months, with banks experiencing very weak lending figures in February and March.

There is an air of expectancy that the Bank of England’s Monetary Policy Committee may issue further interest rate cuts, following on from last month’s quarter-point reduction. There was added pressure on the Bank to follow this course of action as credit condition surveys showed that towards the end of 2007, lenders had “reduced materially” mortgage availability and had plans in the new year to make mortgage conditions more stringent.

The latest information from the Bank indicate things will only get more difficult for potential homebuyers attempting to obtain loans.

‘Specialist lenders’ who perhaps offer loans for buy-to-let or those with poorer credit histories have also endured a significant drop in mortgage approvals.

This drop in lending figures has emerged at the same time as Nationwide Building Society reported a 0.5% drop in average national house prices.

The Nationwide’s own figures confirm a drop off over all its UK regions, however the most notable took place in Northern Ireland where unlike the first half of the year when prices were rising at an annual pace of 55%, the last few months of the year saw a 0.2% drop in prices, cutting annual house price inflation in that area to 24.2%. Yorkshire was also mentioned as coping with a 0.2% price fall in the last few months of 2007, yet other areas did continue to show price gains.