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Hopes of a sustained recovery in house prices faded today after another slide in mortgage lending.
UK banks approved 33,698 mortgages in July, down from 34,575 in June, the British Bankers' Association said.
It was the second consecutive monthly fall and went some way to explaining why house prices have stagnated during the summer.
A flood of properties coming onto the market at a time of weak demand has also taken its toll.
George Buckley, chief UK economist at Deutsche Bank, said: “The housing market is moving sideways at the moment. Unless there is a pick up in mortgage lending, there will be no pick up in house prices. You need to see some rise in lending in order to produce a recovery in house prices and that is not forthcoming at the moment.”
Ed Stansfield, chief property economist at Capital Economics, said: "Growing pressure on household finances, rising fears about job security and still-tight lending criteria are depressing activity in the housing market.
"It is hard to see what might give a boost to mortgage lending in the near term."
Banks were approving between 70,000 and 80,000 mortgages a month before the housing boom turned to bust in 2007. Lending this year has hovered around 33,000-36,000 a month.
Many househunters claim they are unable to get a mortgage because banks are unwilling to lend to anyone without a sizeable deposit. Banks argue that demand for mortgages is also subdued as would-be buyers worry about their jobs and the wider economy.
BBA statistics director David Dooks said: “The greater availability of properties for sale and slowing house price growth have not yet fed through to increased house purchase approvals.”
Reader views (19)
People in this thread allow what they want; their desires, to cloud their lateral thinking. Prices will not bomb. People have predicted this for years an deven in the event of the greatest recession since the war, prices fell less than 10%.
What you want to happen, isn;t what will happen. And my point about supply and demand is absolutely valid.
- Paul, London, 25/08/2010 10:07
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- Nick, Sydney, Australia, 24/08/2010 22:41
IF NICK earned 5 x the average male salary, he would get $300,000.00 per year, and on that he could borrow over 2 million dollars, so he is giving a bit of BS.
Below I give to URL for St George Bank in Sydney, a calculator for how much you can borrow
- Richard Merrell, Wentworth Falls NSW, Australia, 25/08/2010 06:33
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Guys, I live overseas in Sydney where the market is so out of whack that London and the UK seems good value ! I earn more than 5 times the average Australian salary, my wife works and we still cannot afford a house
- Nick, Sydney, Australia, 24/08/2010 22:41
The average Australian salary for males is approx $60,000, so Nick tells us he earns 5 x that amount, which would amount to $300,000.00 per year; = 171,839.73 GBP and he reckons he still can't buy a house here ? that is total BS.
NICK might like to bugger off back the UK and stay there ?
- Richard Merrell, Wentworth Falls NSW, Australia, 25/08/2010 06:12
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Guys, I live overseas in Sydney where the market is so out of whack that London and the UK seems good value !
I earn more than 5 times the average Australian salary, my wife works and we still cannot afford a house - the system is a joke.
Come here and see a real property bubble about to burst. To make matters worse the negative gearing of BTL properties is tax-deductable from your annual income, rather than being a seperate carry-forward as it is in the UK.
N
- Nick, Sydney, Australia, 24/08/2010 22:41
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Surely a good measure of a successful economy is improving living standards including more citizens living in their own quality houses.
NOT according to the UK media!
House price rises are celebrated
Rent rises welcomed
The rise of BTL sacred
This country is obsessed with a greed sickness.
- R Lovejoy, blyth, Northumberland, 24/08/2010 17:57
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Paul,
The Japanese thought exactly the same, look what happened there.
- Mike, London, 24/08/2010 16:45
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Paul,
Bertha is correct.
Although a slight shortage does propel prices to a degree, property still has to be affordable to the overwhelming majority of the population.
Millions of people can only afford the house they are living in because they bought it when it was very much cheaper, and millions of young people will never be able to afford to buy those properties off them.
The market is therefore fundamentally unsound, and will collapse eventually, even if not a single new house is built.
So it's time to come back to reality, accept the inevitable, and focus on making sure everyone has a decent home to live in.
- Tom Archer, Cambridge, 24/08/2010 16:45
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Bertha Vanation
Incorrect. You are ignoring teh concept of supply and demand. With population set to explode and teh current government scrapping the existing targets for home creation, there will always be too many people chasing too few properties. This will maintain prices though there will be variations.
- Paul, London, 24/08/2010 16:04
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Can you please stop this endless nonsense about how great it is when house prices rise.
For heaven's sake, THINK about it for a minute. The higher house prices are, the bigger mortgages are. The bigger mortgages are the less people have to spend and create demand in the economy.
People in this country need high salaries to afford a roof over their head. How can we compete in a global economy when we need massive salaries to pay for houses - compared to say someone in India or China, or Russia or Brazil etc etc.
It is time to get real and stop kidding ourselves we can all buy a house and retire on the proceeds when we sell it.
It is essential for our children's sake that house prices be allowed to crash and the government should stop trying to manipulate the market.
You do realise this has been a deliberate attempt by the banks to enslave us with debt. What would they rather do - lend 100k against a house 'worth' 125k or lend 200k against the same house 'worth' 250k. Yep, you got it in one. The higher house prices are, the more they lend, the more they make in interest, the more we are all debt/wage slaves.
Now houses are unaffordable - they want us to take on 40 year mortgages instead of 25 years. Truly, we are collectively stupid. We have been raped by the banks, they've paid themselves billions in bonuses, they've gone broke and been bailed out by us - now they want us pay them interest for 40 years to buy a slave box.
- Mike Wilson, Winchester, 24/08/2010 15:03
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Since banks now actually check how much people earn before giving them a mortgage, they aren't lending above 3.5 times salary. Average salary levels in the UK are 25K and stagnating. Throw in a deposit and that means the average house price should be about 100K.
Most people can see UK house prices are much more. Without more self-certifying mortgages (aka "liar loans") there is a significant gap between what people are being allowed to borrow and what a house costs. Result? Plummeting prices.
Many of those now struggling to sell their house are in absolute denial that the boom is over. The peak 2007 prices are not returning soon. Increasing house prices create an illusion of wealth that most people in this country fail to comprehend. Unlike works of art or vintage cars, people still need a home. Rising house prices only benefit those planning to down size or whose property is somehow rising in price faster than others. Both are unlikely scenarios.
Instead, many present house sellers have been conned by vested interests like estate agents that ever-increasing house prices are a god-given right. The present prices are punishing for first time buyers. Those who can afford to buy pay a very high % of their monthly income on mortgage repayments, prolonging the recession. High house prices also seem wonderful until your kids come knocking for help to buy a dingy terrace for 200K. Wake up and smell the coffee - UK house prices are too high and a correction is long overdue.
- Paul B, Oswestry, 24/08/2010 14:40
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I sometimes think the people that make the comments to these articles would do a better job at writing the article in the first place, as they make more sense.
House prices rises are NOT a good thing. Not, as said above, when you need two incomes, a huge deposit and 40yrs to pay off the mortgage. Even for those ON the ladder already, it makes it increasingly more difficult to move up, as the rungs get further and further apart.
A return to the norm is the only way to get this country productive again. Make people work for their money, instead of sitting in their bums making money from their house(S)
- Keith, Stevenage, 24/08/2010 14:36
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House prices are unsustainable at their current levels, even here in London with higher than average wages. Surely any good journalist worth their salt would realize that house price inflation (especially at the current time when wage rises are fairly static and the 'so called' recovery is faltering at best) is a bad thing from their current level. It seems to me that the housing market as a whole is just a giant pyramid scheme that could collapse at any moment. I simply cannot believe that anyone would report this news as a bad thing. This just shows how misguided some journ'os are. There is no doubt that more reasonable prices would result in amuck healthier property market as a whole. We all need to start thinking about houses as 'homes' and not money making machines.
- David, London, Royal Victoria, 24/08/2010 14:35
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"slowing house price growth" indeed, soon to be "negative growth" and shortly after "vertical inverse growth".
- Thomas Hobbes, Derby, 24/08/2010 14:33
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Because everyone needs somewhere to live, high house prices benefit the few and burden the many.
The country has a slight housing shortage, which causes needless misery for those who have to endure cramped living conditions.
We also have a serious unemployment problem; one that is likely to get worse before it gets better.
There is loads of derelict land around that could be developed for housing, and only 5% of the UK is covered by houses at present; so it is nonsense to suggest that we lack the land to build more.
It is time to cut through the red tape that obstructs development, and create a million new jobs through new residential development.
Only the selfish can find fault with such a plan.
- Tom Archer, Cambridge, 24/08/2010 14:28
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who would want to take out a mortgage with the possibility of increase in interest rates, job insecurity; a possibility of higher repossessions and a double-dip recession?
Get real for goodness's sake.
Things are only going to get worse, not better.
Signs of recovery? Give it about four years' time.
Don't listen to the so-called experts. Sit down and work things out for yourselves.
- Steve, Bexhill-on-Sea, 24/08/2010 14:27
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ALL asset bubbles eventually collapse. This housing market is no different. All the fundamentals point to one conclusion, house prices WILL definitely fall around 25-30% from current levels.
- Bertha Vanation, Plymouth UK, 24/08/2010 14:25
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sustained recovery = misery for renters continues as houses are unaffordable.
When is this country going to wake up. Why pay double what a house is worth. Look at building costs and the land shortage scam needs to end.
When interest rates rise, as they surely have to, house prices will plummet. Remember, a mortgage is for 25 years.
- Nick, sumware, 24/08/2010 13:39
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The banking mortgage securitisation game is over, when will people realise this. Back to traditional lending, instead of this 100% financing to sub prime borrowers before 2007. No buyers left to buy. Its a great time to rent though, dont see prices surpassing 2007 peak in real terms, until 2015 at the earliest..
- Mike, London, 24/08/2010 12:48
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Hang on a sec... house price inflation is a GOOD THING? You want to see house prices climbing steadily until they are out of the reach of everyone but the most wealthy? Are you serious? We all need somewhere to live. A house is a necessity, not a bloody investment. Who in their right mind sanctions ANY kind of inflation??? House prices need to fall to the level where it requires only ONE income for 25 years to pay off the mortgage. A £30,000 deposit, two salaries and 40 years to pay off the mortgage on an average family house is sheer madness. Who's going to stay at home to raise the children? I can't believe the greed of some people. House prices will crash spectacularly, and it will all end in tears. Just wait and see.
- Tiburonsmoke, Fishguard, UK, 24/08/2010 11:47
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