LONDON (Reuters) - Mortgage approvals fell to their lowest level in nearly two years in December, figures from the British Bankers’ Association showed on Wednesday, in a further sign that UK housing market weakness is set to continue.
Mortgage approvals are a good indicator of house price trends around six months ahead and the figures appear to support economists’ forecasts for modest falls in 2011.
The number of mortgage approvals in December fell to 28,726 from 29,696 in November, the lowest since January 2009, according to the BBA’s seasonally adjusted data.
Net mortgage lending, meanwhile, climbed by just 0.88 billion pounds, its weakest rise since June 1999.
“Mortgage demand was weak throughout the year, with 10 percent fewer loans approved than in 2009,” said BBA statistics director David Dooks. “Unsecured credit demand was also weak...as households adopted a lower appetite for credit due to the uncertain environment for employment and the economy.”
Public spending cuts, high unemployment, limited wage growth and tight mortgage availability are all expected to erode demand through the year. Pressure on household finances from high inflation is also likely to weigh on prices.
“Housing market activity remains stuck in the doldrums, which seems highly likely to maintain downward pressure on prices,” said Howard Archer, chief UK economist at IHS Global Insight. “The fundamentals remain largely unfavourable for the housing market.”
However, prices may gain some support from growing signs that fewer houses are coming on to the market, he added.
Editing by Toby Chopra