KEY POINTS:
The property market is rapidly cooling, with the credit squeeze beginning to take its toll on British housebuyers, according to the British Bankers' Association.
The BBA says in November, the number of mortgages approved for UK homebuyers fell by more than 40 per cent compared with a year earlier, though they were just above the nadir reached in October (itself the lowest rate since the BBA series started in 1997), and healthier than some analysts feared.
Partly reflecting the increase in house prices over the past 12 months, the value of gross mortgage lending was less badly affected, but still down 16.9 per cent on a year earlier. Net underlying mortgage lending continued to soften, posting a rise of £4.3 billion ($11.1 billion) on the month, down from a £4.8 billion increase in October and well below the previous six-month average rise of £5.5 billion.
Meanwhile, the Institute of Directors predicts that the economy is entering a period of "sticky-flation", with a sharp slowdown in GDP growth against a backdrop of stubborn retail inflation, with "flat/falling house prices".
The IoD believes GDP growth will almost halve to 1.7 per cent next year, from 3 per cent this year, and somewhat below the Treasury's estimate for growth of 2.0 to 2.5 per cent.
The BBA's numbers, representing the main high street banks, echo last week's weak lending data from the Building Societies' Association. The BBA also detected signs that the credit crunch had begun to make its presence felt in the residential real estate market. Bank lending to companies is running lower than the recent trend, slightly at odds with past survey evidence from the Bank of England and the CBI which suggested that the non-bank corporate sector had weathered the credit squeeze relatively well.
Larger UK companies usually have sufficient resources of their own to fund investment plans and working capital; the squeeze will probably be felt most acutely by smaller concerns and those with weaker credit ratings. However, it is the indications for the future course of the housing market that make the BBA statistics particularly ominous.
"Mortgage activity is notably lower than this time last year and, as we expected, lending has begun to slow down," said David Dooks, the director of statistics for the BBA.
Nationwide, Halifax and the Council for Mortgage Lenders predict house price growth at or close to zero for next year.
- Independent
