The latest data from the Bank of England shows that new mortgage approvals have dropped by a whopping 37% over the last year.
Although mortgage approvals over February edged down from 74,000 in January to 73,000, in February 2007 there were 111,000 new remortgages.
This represented a fall of 7,000 applications when compared with the 118,000 cases in January 2007.
But the Centre for Economic and Business Research says that a fall in transaction numbers should not lead an equal fall in house prices. It’s predicting that the a soft landing for the UK housing market, with prices falling by just 3% over 2008.
Richard Snook, economist at the Centre for Economics and Business Research, says: “The number of housing transactions in the UK has taken a substantial hit from the credit crunch as banks have restricted lending.
“This effect is the result of both the re-evaluation of default risk and an attempt by banks to rebuild liquidity. However, the extent to which this will affect house prices is not clear – particularly given the nature of the housing market.”
Snook though says that while the majority of would-be sellers have a choice as teo whether to sell or ride out the storm, but he says this breaks down is a large number of forced sales following repossessions.
He adds: “Two examples of how forced sales can lead to a sharp decline in houses prices are the UK in the early 1990s, following the sharp rise in unemployment and more recently in the US following the gross mis-selling of mortgages to people unable to afford them.”