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Mortgage approvals plunge to new low in June

Posted on 3:53 AM by Sameer Shah

Homeowners have been warned to brace themselves for further falls in the value of their houses after figures from the Bank of England showed mortgage approvals have plummeted by more than two thirds in a year.

The Bank said the number of approvals slumped 68.4pc to 114,000 year-on-year in June. They were down from 41,000 in May to just 36,000 last month, the lowest level since records began in 1993.

Economists, who had forecast a reading of 37,000, said the figures are the latest evidence of how borrowers are being hit by the credit crisis, which has forced banks to curb lending and insist on bigger deposits before offering new loans.

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Howard Archer, chief UK and European economist at Global Insight, said: "This is yet more very disturbing mortgage data that heighten concerns over the potential depth and length of the housing market correction.

"Very low mortgage activity suggests that house prices will continue to head south at a pretty rapid rate," he added.

He warned those people who took out 100pc or even 100pc plus mortgages within the last three years were particularly vulnerable to falling into the negative equity trap.

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors (RICS), said: "The latest numbers from the Bank of England demonstrate in the clearest possible way the consequences of the credit crunch for the residential property market."

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