Mortgage approvals slump to 20-month low

Mortgage approvals for house purchases sank to a 20-month low in November, while net mortgage lending was just £1.5bn – the lowest level since August 1999, according to British Bankers' Association (BBA) figures published today. Just 29,991 mortgages were approved compared to 30,689 in October and a three-year peak of 45,740 in December last year. November's mortgage approval data represents a 31.7% year-on-year drop and is about half the average monthly level of 58,513 seen since 1997. Gross mortgage lending of £7.8bn in November was 13.5% lower than a year ago, while the net lending figure of £1.5bn is 56% down on the £3.4bn seen in November last year. But the number of remortgage approvals in November was stronger than the recent six-month average, as more borrowers switched lenders when rolling over their fixed-rate loans. There were 27,045 remortgage approvals in November compared to 24,785 in October and 21,597 in November 2009. Howard Archer, economist at IHS Global Insight , said the BBA data showed that the housing market was ending 2010 "very much on the back foot, where we expect it will remain for much of 2011". He added: "Housing market activity remains stuck in the doldrums, which seems highly likely to maintain downward pressure on prices. In the near term, the bad weather will hinder housing market activity. "The data reinforces our belief that house prices will trend down gradually to lose around 10% from their peak 2010 levels by the end of 2011. In our view, the housing market has got little going for it at the moment, apart from low mortgage rates – and that is if you can get a mortgage." Archer said that critical to the development of house prices over the coming months will be the amount of houses coming on to the market, mortgage availability, and how well the economy and jobs hold up as the fiscal squeeze increasingly kicks in. Consumers repay credit The BBA also reported that credit card purchases were reasonably strong in November as shoppers rushed to buy Christmas presents, but credit card repayments kept pace, resulting in a net repayment of £27m during the month. There was also a net repayment of £145m in personal loans and overdrafts in November. Archer said: "The further net repayment in consumer credit in November indicates that consumer appetite for taking on new borrowing remains limited, while there is an ongoing desire of many consumers to reduce their debt. "This is a reflection of current low consumer confidence and is the consequence of an uncertain and somewhat worrying longer-term economic outlook, highlighted by the major fiscal squeeze that will increasingly kick in over the coming months. Meanwhile, there remains limited availability of unsecured credit from banks."