Mortgage approvals fall to a new low... and economists warn it could get worse

The number of mortgages handed out in April has slumped to the lowest level since records began.

Just 29,355 house purchase loans were granted last month – 18 per cent fewer than the same month last year. 

This equates to 950 granted each day, compared with nearly 2,800 during the housing boom.

The figures, released yesterday by the British Bankers’ Association, emphasise that housing market problems are continuing. Banks are still demanding large deposits, and many families are too scared to buy even if they can get a loan.

Economists said they see little prospect of the mortgage drought coming to an end any time soon.

Paul Diggle, of Capital Economics, said: ‘The chances of a meaningful improvement in mortgage lending, at least for the foreseeable future, are remote.’ 

The average home in England and Wales costs £161,000 – and the average buyer puts down a 26 per cent deposit.

 

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This means a typical buyer must find a deposit of about £42,000 when they buy a home, an amount which millions of families could never afford.

For many other families, they can afford to buy a home, but they are too nervous about their finances over the next few years to take the plunge.

There is a long list of worries from insecurity about their job, higher taxes, poor pay rises and the possibility that house prices could fall sharply.

David Dooks, statistics director of the British Bankers’ Association, said: ‘Many people think: ‘If I don’t have to move, I’ll sit tight and wait for sunnier days.’ 

Over the last year, house prices have fallen in every region of the country, except London, according to the Land Registry.

In the worst-hit region – the North East – prices have slumped by nearly 10 per cent, with the average house price only just above £100,000.

Howard Archer, chief economist at the consultancy HIS Global Insight, predicts prices will continue to drop for the rest of the year.

He said: ‘Furthermore, very low and currently falling consumer confidence will make many people reluctant to risk buying a house.’ 

The Council of Mortgage Lenders said the April figures for the mortgage market may have been distorted by the extra Bank holidays.

There was the four-day Easter break followed by the Royal wedding, which means many people will have shelved any plans to buy.