Mortgage approvals hit record low

Mortgage approvals tumbled in June, with housing market activity hitting its lowest since the 1990s.

British Banking Association statistics showed June's mortgage lending rose by £3.8 billion but this was weaker than in May, when lending rose by £4.5 billion.

Homeowners are still remortgaging, with levels similar to the previous month, while personal deposits increased by £2.2 billion as people saved more over the month.

Unsecured borrowing was slower, with an extra £0.3 billion spent on consumer credit in June compared to £0.4 billion in May.

BBA statistics director, David Dooks, said: "Another record low number of mortgages approved by the banks for house purchase means that the whole market is likely to be at its least active since the early 1990s.

"The pressure on household finances is being reflected in subdued consumer borrowing, with spending on cards lower than of late and borrowing on personal loans and overdrafts being comparatively weak."

The level of property transactions has continued to fall and house prices are in decline as the availability of mortgages dry up and consumers cut back on spending.

However, the Bank of England has refused to cut interest rates to support the economy as it attempts to control rising inflation.

Royal Institute of Chartered Surveyors (Rics) chief economist June Simon said: "The continuing lack of availability of mortgage finance is proving a major drag on the level of property transactions and is increasingly being felt in the real economy.

"The modest cuts in the costs of borrowing seen over the past few weeks will unfortunately provide little relief for first time buyers. Indeed, the fact that Tim Besley actually voted for a rate hike at the latest MPC meeting suggests that it is premature to expect the Bank of England to provide any support anytime soon."

Rics wants to see the government shake-up stamp duty to assist first-time buyers and review the provision of mortgage finance.