British approvals for new home loans fell 65 percent on a year ago in July to hold near a record low and the British Bankers' Association said on Tuesday it was not expecting a housing market recovery soon. The survey added to evidence pointing to a sharp downturn in a once red-hot property market and reinforced expectations that the next move in interest rates will be down as Britain flirts with its first recession since the early 1990s.
The BBA said mortgage approvals totalled 22,448 last month, just above June's series low of 22,369 but almost 12,000 below the average of the last six months. "While it is possible, but by no means certain, that mortgage approvals have hit their floor, with the economy teetering on the edge of recession and lending criteria still tight, mortgage demand is likely to remain at current low levels for some time," said Capital Economics property analyst Seema Shah.
The Council of Mortgage Lenders said new mortgages for the once lucrative buy-to-let lending fell 15 percent on a year ago in the first six months of the year. House prices in Britain have fallen around 10 percent since last August after a decade in which prices almost trebled. The global credit crunch has forced banks to tighten their mortgage lending terms - many now refuse to offer mortgages to homebuyers with less than a 25 percent deposit.
And rising unemployment and higher living costs continue to make it difficult for first-time buyers to get a foot on the property ladder. "The monthly numbers of approvals for house purchase ... levelled off in July. It would, however, be premature to think that the housing market will now start to recover," said BBA statistics director David Dooks.
In a further sign of the pain inflicted on the housing sector, Britain's Bovis Homes reported a slump in first-half profits on Tuesday and said trading conditions in recent months had been the toughest it had ever experienced.
And a report from ratings agency Standard & Poor's showed the number of Britons failing to meet mortgage repayments rose significantly in the second quarter. "With no sign of credit conditions easing and house prices continuing to fall, we expect delinquencies to continue rising and losses to increase over the coming quarters," said S&P credit analyst Kate Livesey.
Markets now expect the Bank of England to cut interest rates, perhaps before the end of the year, despite inflation running at more than twice the official 2 percent target because the economic downturn is seen taming price pressures eventually. Britain's economy ran out of steam in the second quarter of this year, the first quarter it has failed to grow since 1992, and BoE Deputy Governor Charles Bean said on Monday he expected the financial crisis which has hit global growth to continue.
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