Dramatic drop in mortgage approvals

Mortage approvals for December 2004 where 38% lower than in December 2003 say the British Bankers Association.

When making the year-to-year comparison, December 2004 saw the number of mortgage (house purchase loans) fall by 38% by number and 31% by value. Remortgaging loans also fell by 15% and 2% in value. Those using their homes to release equity alsl fell by 34% and 28% by value.

During December, gross mortgage lending totalled £14,237m, a decrease of 2.6% from November 2004. (November’s gross lending was £14,610m). When compared to December 2003, that is a drop of £1557.

Net mortgage lending rose in reported terms by £5,741m, but this was inflated by around £0.5bn of internal group transactions, where the banks where playing “catch-up” on applications from November. New regulations caused this backup to occur. The increase in net mortgage lending did not represent increased demand from customers. The underlying rise was stronger than Novembers £3,665m, although the annual growth rate remained at 14%.

Issuing the report, David Dooks, BBA director of statistics, said: “Despite an upturn in net mortgage lending in December, in part reflecting a processing catch-up, the general slowdown in demand over the last six months saw lending in 2004 matching 2003s increase of £62.3bn. This time of year sees a seasonal weakness in loan demand, but with approval volumes running well below those in the same month a year earlier, mortgage lending is expected to remain relatively subdued in the near-term.

The modest growth in banks’ consumer credit lending over the month reflected the apparent weakness in consumer sentiment suggested by Decembers retail sales index.”