Mortgage approvals at 9-year low and lending to stay hard to find

Mortgage approvals fell to a nine-year low in November, according to new statistics from the Bank of England, and lending is expected to fall further in the coming months.

There 27,000 house purchase mortgage approvals recorded.

A total of 42,000 remortgages were approved in November – substantially down on the 72,000 recorded in October.

Lending to consumers and businesses is also not expected to improve in 2009.

The Bank of England’s Credit Conditions Survey shows lenders expect a further decline in the availability of mortgage lending – with banks over the last three months lowering loan-to-value (LTV) rates on mortgages tightening credit scoring criteria.

This fall in lending is being put down to expectations of further house price falls and concerns about the economy.

As supply of mortgages drops, demand remains stable, the survey of lenders reveals, meaning borrowers are now left in the situation where they must really seek out a mortgage deal.

Andrew Montlake, partner at mortgage broker Cobalt Capital, said: “It may be 2009 but the ghosts of 2008 will continue to haunt us, and for some time yet.

“The November mortgage lending figures are just another grim reminder of the death, last year, of easy money and consumer confidence, and there will be many more in the months ahead before things finally start to improve.”

The Bank of England survey also shows a rise in people defaulting on mortgages and larger losses for mortgage lenders from defaults – as house prices fall.

Default rates are expected to rise further in 2009.

Liberal Democrat shadow chancellor Vince Cable said: “It does appear that the inevitable big correction in the housing market is being exaggerated by the complete collapse of mortgage lending by the banks.

“The government is completely paralysed at this crucial moment.

“Ministers should consider promoting a simple, standardised mortgage with a market guarantee for the first few years of interest payments in order to help first time buyers who can genuinely afford to take on home ownership.”