Mortgage approvals at lowest since 1997

Mortgage approvals slumped to a fresh record low last month - but cash deposits in British banks rose as customers brought home money from bankrupt rivals in Iceland.

The British Bankers' Association today reported that the number of mortgages approved for house purchase sank to just 17,773 in November as banks continued to ration lending.

It was the lowest since the survey began in 1997 and down 14% from October, 61% from a year ago, and 72% from the July 2007 peak of 64,014.

It came despite Government attempts to get banks lending again, including the £37 billion recapitalisation project that saw the taxpayer take stakes in Royal Bank of Scotland, HBOS and Lloyds TSB.

Howard Archer of Global Insight said: "The mortgage data indicate housing market activity remains dead in the water. The outlook remains bleak. It is still very difficult for many people to get a mortgage or find the required larger deposit. Even if the Government measures to tackle the financial-crisis work on a sustained basis, it will clearly take time for confidence to improve and mortgage lending to pick up significantly."

Shadow chief secretary to the Treasury Philip Hammond said: "The news that mortgage approvals are nearly two-thirds lower than last year is yet more evidence that Gordon Brown's bank recapitalisation package is failing to revive Britain's flagging housing market."

Net mortgage lending showed its weakest monthly change since April 2001, rising by £2.9 billion last month compared with £3.3 billion in October. BBA statistics director David Dooks blamed it in part on the dramatic cut in interest rates from 4.5% to 3% last month. They have since fallen to 2%.

"The 1.5% November reduction caused lenders to reassess product ranges and borrowers to reconsider future borrowing costs, so consequently there was another drop in market activity," he said. Dooks also reported an increase in deposits as British savers closed bank accounts in Iceland and put the money back into UK banks.

Credit-card spending was up £200 million in November, 7.9% more than a year ago, as cash-strapped shoppers bought Christmas presents.