Mortgage approvals fall to record low as housing market slump continues

The number of mortgages approved for people buying a home fell to a new low for the second successive month, the Bank of England said today.

Just 58,000 loans were approved in April, the lowest since the Bank began collecting data 15 years ago.

March's previous record low of 64,000 was also revised down to 63,000.

The April figures were far worse than the small increase to 65,000 expected by economists and offer more evidence of housing market gloom as banks tighten up lending and buyers are deterred by economic fears.

The number of loans approved for home buying has fallen to just over half the 107,000 seen 12 months earlier.

But the Bank data shows loans approved for people remortgaging their property increasing by 8,000 to 106,000 in April.

Those trying to get their foot on the property ladder without equity built up in an existing home, however, need bigger deposits and face more expensive deals.

The overall value of mortgages approved over the month was £23.8 billion - below the average £26.1 billion lent in the previous six months.

Howard Archer, chief UK and European economist at Global Insight, said the housing market was under pressure from a 'toxic combination' of stretched affordability and tight lending conditions.

'Elevated affordability pressures on potential house buyers stem from high house prices and modest real disposable income growth, while still tight credit conditions are leading to significantly fewer and more expensive mortgages being available,' he said.

Despite the housing gloom, the Bank of England is almost certain to keep interest rates on hold this week because of fears over soaring oil and food prices - which could take the cost of living to almost double official targets later this year.

But economists voiced new warnings today on the impact of the restricted conditions on the wider economy.

The Royal Institution of Chartered Surveyors' chief economist, Simon Rubinsohn, said: 'A collapse in transactions of this magnitude has major implications both for consumer spending and a wide range of ancillary industries.

'Although a supportive response from the Bank is improbable in the near term, the persistence of such a trend could force the hand the authorities as autumn approaches.'

The Bank's figures also showed consumer credit shrinking by 25 per cent to £0.9 billion during April. Net credit card lending rose by £0.1 billion, a smaller increase than the previous month.