UNITED Kingdom mortgage approvals fell to the lowest in more than a decade in March as a credit squeeze prompted banks to curtail lending, according to the British Bankers' Association.
Banks granted 35,417 loans for house purchases, the fewest since record-keeping began in September 1997 and down 46 percent from March 2007, the London-based BBA, which represents the biggest UK banks, said yesterday in a statement. The number is down 18 percent from February, Bloomberg News reported.
A surge in market borrowing costs has prompted banks to withdraw their best mortgage offers, threatening to exacerbate the worst housing downturn since 1992. The Bank of England this week offered to swap at least 50 billion pounds (US$100 billion) of government bonds for mortgage securities to kick-start bank lending.
"The consequences of low banking-sector liquidity show up clearly in March data," David Dooks, director of statistics at the BBA, said in the statement.
"Reduced product ranges and tighter criteria resulted in slower mortgage lending and significantly fewer loan approvals."
Total mortgage lending, including the refinancing of existing home loans, exceeded repayments by 5.1 billion pounds in March, the BBA said. Consumers repaid credit-card debt, as they did throughout last year. Interest accounted for a 300-million-pound increase in debt held on credit cards.
With home foreclosures rising and the UK economy heading for its worst performance in 16 years, Chancellor of the Exchequer Alistair Darling on Tuesday urged the heads of British banks to give extra leeway to home owners struggling with mortgage payments.
Banks and mortgage lenders including HBOS Plc and Nationwide Building Society have refused to pass on three Bank of England interest-rate cuts since December to customers because of higher funding costs. Abbey, Britain's second-largest mortgage lender, said this week it will cut rates on some adjustable loans.
The three-month London interbank offered rate for pounds was unchanged at 5.88 percent on Tuesday.