Home purchase mortgages slide 29% in a year

Mortgages approved for home purchase last month were 29% down on a year ago, say bankers.

The dire state of the UK mortgage market at the start of 2011 has been shown by the January figures from the British Bankers Association.

The BBA said mortgages approved by its members in January for home buyers were 29% lower than a year ago.

The bank approved just 28,932 loans for house purchase, although the BBA said this was slightly higher than in December.

Meanwhile the lack of progress in property sales in the UK was also highlighted by HMRC figures, with just 54,000 homes sold across the UK last month, unchanged from January last year.

“We are seeing little change in the borrowing environment for households or businesses at the start of 2011,” said the BBA’s statistics director, David Dooks.

The BBA’s picture of the housing market is slightly different to that reported last week by the Council of Mortgage Lenders, although equally gloomy. The CML reported that lending to home buyers in January dropped by 13% from December, and was its lowest level for a year.

The CML warned that lending will continue to stagnate because of the subdued state of the economy and the lack of funds available for lending.

On Monday, property portal Rightmove said the UK property market faced “paralysis” this year, as would-be sellers failed – or were unable – to drop their prices to realistic levels in line with sales prices achieved. Instead, sellers new to the market have raised their prices by 3.1%.

Housing expert Henry Pryor said the chances of vendors selling their home this year is less than 40%. He warned that sellers who had raised asking prices had “completely misread the market”.

He added: “Worryingly, Rightmove saw 121,635 new homes come to the market, a 35% jump on last year. Volumes of sales have not risen by a similar amount, leaving an over-hang of property for sale which will put downward pressure on sale prices.”

The yawning gap between asking prices and actual prices is huge: the average asking price on Rightmove is now £230,030. According to the Land Registry, the average selling price is currently £68,846 lower at £163,184.

For the whole of last year, HMRC recorded just 884,000 sales with 560,000 mortgages. Some 43% of sellers found a buyer.