LONDON (Reuters) - Mortgage approvals for house purchases fell in March to their lowest level since comparable records began, suggesting a housing market downturn is gathering pace.
Figures from the Bank of England on Tuesday showed mortgage approvals — a leading indicator of housing demand — dropped to 64,000 last month from a downwardly revised 72,000 in February.
That was the lowest number since the series began in January 1999. It was also the lowest since monthly records started in April 1993, although at that time remortgaging approvals by banks were included.
“If this trend continues it would tend to point to rate cuts despite the fact that the Monetary Policy Committee is known to be walking the tightrope at the moment,” said Philip Shaw at Investec.
“The decline in mortgage approvals for house purchase ... are still extremely weak and to some extend quantify the impact of the credit crisis.”
House prices have been falling on a monthly basis since the end of last year as tighter credit conditions have made it more expensive for people to borrow.
The Bank said that on a comparable basis, approvals in the first quarter of this year were the lowest since the fourth quarter of 1992 when the economy was emerging from a recession.
A scarcity of credit means mortgage rates for many borrowers are now higher then they were before the Bank began to cut interest rates at the end of last year. The Bank has cut rates three times since December and is expected to cut again by the middle of the year.
The biggest mortgage lender HBOS asked shareholders on Tuesday for 4 billion pounds as it grapples with toxic assets and said it expected credit conditions to deteriorate over the course of the year.
The Bank unveiled an ambitious scheme last week to allow banks to swap mortgage assets for Treasury bills in a bid to ease the logjam in money markets and get banks lending again. However, there has been little sign so far that money market tensions are easing.
Total net lending in March came in at 8.167 billion pounds, the lowest since June 2002, while mortgage lending of 6.93 billion pounds was the lowest since March 2005.
Reporting by Christina Fincher and David Clarke, editing by Mike Peacock