UPDATE 1-UK mortgage approvals slump 61 pct to fresh low

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By David Milliken

LONDON Dec 23 (Reuters) - The number of mortgages approved for home purchase in Britain slumped to a fresh record low in November, with the seasonally-adjusted number falling to 17,773 -- almost 61 percent down on the same time last year.

Mortgage approvals are now barely one third of the average level at the peak of the housing market in 2007, the data from the British Bankers' Association showed.

The news spells further gloom for British house prices, which are 15 percent lower than a year ago, and continues a stream of bad data that has led many economists to expect the Bank of England will cut interest rates to a record low of 1 percent next month.

Underlying net mortgage lending showed its weakest monthly change since April 2001, rising by 2.9 billion pounds ($4.28 billion) in November, down from October's 3.3 billion rise.

BBA statistics director David Dooks blamed part of the drop on banks and prospective home-buyers pausing to take stock after the Bank of England slashed interest rates by 1.5 percentage points in November.

"The 1.5 percentage point November reduction ... caused lenders to re-assess product ranges and borrowers to re-consider future borrowing costs, so consequently there was another drop in market activity," he said.

The average value of a new mortgage for home purchase was 117,000 pounds, 23.7 percent lower than a year ago and greater than the percentage fall in house prices recorded in separate data from major mortgage lenders for last month.

"People remain concerned about the impact of the rapidly slowing economy on their personal finances," Dooks added.

The tumble in approvals for home loans was mirrored in sliding approvals for refinancing deals and other mortgages.

Remortgages were down almost 50 percent on the year at 29,798 and other mortgages were down 44 percent at 22,295.

Howard Archer, chief UK economist for IHS Global Insight, said the data spelt further gloom for the British housing market.

"The outlook for the housing market remains bleak. Ongoing very tight credit conditions, still relatively stretched housing affordability on a number of measures (and) faster rising unemployment ... form a powerful set of negative factors weighing down on the housing market," he said.

The BBA data also showed that Britons were continuing to use their credit cards in the run-up to Christmas. Net card borrowing was up 200 million pounds in November, 7.9 percent higher than a year ago. (Editing by David Stamp/Tony Austin)