Barker says housing hit by credit crunch

CHELMSFORD (Reuters) - The credit crisis is making it more difficult for consumers to buy homes and affordability is unlikely to improve even if house prices fall this year, Bank of England policy-maker Kate Barker said on Wednesday.

House price growth has cooled markedly in recent months as the credit crunch hurts the ability of banks to get hold of cheap cash and as affordability constraints price out first-time buyers in the wake of a cooling economy.

Mortgage approvals have fallen to their lowest in more then 10 years.

"Mortgages, particularly for first-time buyers, have become more difficult to get as a result of the credit crunch," Barker said at a housing and planning event.

Most analysts expect the once-red hot housing market -- prices have trebled in the past decade -- to weaken considerably this year, but higher mortgage rates and weaker consumer spending power may still make life difficult for buyers.

"We may see prices adjust downwards but there is no clear evidence that affordability will improve," Barker said.

However, she noted the total mortgage burden for existing homeowners was still below the peak of the 1990s and said sharp rises in house prices had reflected a greater ability to pay rather than decreased affordability.

(Reporting by Christina Fincher; Writing by Matt Falloon; Editing by Frank McGurty)