Credit crunch continues to affect mortgage approval levels

Officials from the British Bankers Association have stated that the continuing credit crunch is still affecting the mortgage and housing sectors, resulting in an adverse known on effect on mortgage approval levels.

Figures show that mortgage approval levels for February were significantly lower than in February of 2007.

Home movers borrowed £43,870 in February of this year, which was around 33% less than the amount that they borrowed in February of last year.

A range of factors has affected the level of mortgage applications and approvals, including fewer products on the market, rising rates, and lack of affordability for consumers.

One official from the BBA said: “In an environment of tightening lending criteria, remortgaging, either to fix, re-fix, or reduce borrowing costs, has been a clear influence on mortgage data in the first two months of this year, resulting in mainstream lenders picking up market share.”

Conditions in the mortgage sector are set to get worse over the coming months according to some industry officials, with many lenders stating that they will be forced to take more deals off the market, raise deposit levels, and increase interest rates as a result of the credit crunch.