Banks only handing out 1,000 mortgages a day as number halves during recession

Published 25th Aug 2010

Banks are handing out just 1,000 mortgages every day, and the situation is getting worse, not better, figures revealed today.

The slump in the number of home loans handed out to buy a new home highlights a toxic combination - the banks' tough mortgage rules and the crisis in millions of people's personal finances.

Many simply cannot afford to buy a property at a time when banks are insisting on super-size deposits of 25 per cent to get the cheapest deals.

In a further blow, many families and young couples are too scared about the future, particularly the threat of redundancy, to dare to buy a property.

The figures, from the British Bankers' Association, show just 33,698 mortgages were handed out to buy a property in July.

This is more than half the amount handed out during the 'normal' times before the credit crunch and the recession.

Despite the official end of the recession, the situation has got even worse over the last year.

The number of mortgages for house purchase, which excludes anybody who is remortgaging, is 18.5 per cent lower than the same month last year.

Ed Stansfield, chief property economist at the consultancy Capital Economics, said: 'It suggests growing pressure on household finances, rising fears about job security and still-tight lending criteria.'

The average loan is £148,500, which is just £10,000 below the all-time high of £158,000, according to the British Bankers' Association.

At this level, a worker who earns the average salary of £25,000 would have to find a bank willing to lend them nearly six times' their salary.

Much of the slump comes from rising levels of job insecurity. Around 600,000 public sector workers are expected to lose their jobs, and many will face a struggle to get a new one.

Research among private sector firms suggests that few are recruiting. If they are, most of the new jobs are part-time, rather than full-time.

To make matters worse, the cost of living is rising at 3.1 per cent, including rises of up to 10 per cent in some food prices.

This leaves millions of people feeling that they can barely survive the month, let alone have the money to save for a deposit for a property.

Mr Stansfield said: 'It is hard to see mortgage lending returning to more normal, pre-recession levels over the next 12 to 18 months.'

One in two UK households 'expect their finances to worsen in the year ahead', according to the latest report from the financial information services firm Markit.

Tim Moore, an economist at Markit, said: 'Household finances continue to suffer from a backdrop of squeezed disposable income, stubbornly high inflation and ongoing public sector spending cuts.

'Meanwhile, job security in the private sector fell at the fastest rate for thirteen months, suggesting that the renewed bout of employment concerns has reverberated beyond the public sector.'

Source: ' Daily Mail '

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