U.K. July Mortgage Approvals Hold Close to Decade Low

By Jennifer Ryan and Brian Swint

Aug. 26 (Bloomberg) -- U.K. mortgage approvals held close to the lowest in at least 11 years in July as property values slumped, a report by the British Bankers' Association showed.

Banks granted 22,448 loans for house purchase, down 65 percent from a year earlier, the London-based BBA, which represents the biggest U.K. banks, said today in a statement. The reading is up from 22,369 in June, the lowest since records began in 1997. The value of mortgages fell to 3.2 billion pounds ($5.8 billion), the least since 1998, from 3.3 billion pounds.

The U.K. property market, which tripled in value in the decade ending last year, is going through the biggest downturn since the early 1990s as banks rein in lending. Bank of England Deputy Governor Charles Bean said last week that the credit crisis will ``drag on for some considerable time.''

``It would be premature to think that the housing market will now start to recover, because overall approval activity continues to be very low,'' David Dooks, director of statistics at the BBA, said in the statement.

The pound extended declines against the dollar. The British currency traded at $1.8337 at 10:53 a.m. in London, from $1.8532 yesterday in New York.

Approvals for re-mortgaging fell 21 percent from a year earlier, today's report showed. Growth in unsecured borrowing slowed to 74 million pounds from 266 million pounds.

U.K. banks have curtailed lending while their writedowns and credit losses from the collapse of the U.S. subprime mortgage market climb above $500 billion.

Standstill

The credit squeeze and the fastest inflation in more than a decade brought economic growth to a standstill in the second quarter, ending the nation's longest stretch of economic growth in a century.

Prime Minister Gordon Brown has pledged to unveil measures to revive the economy next month, while Chancellor of the Exchequer Alistair Darling on Aug. 5 suggested he's considering whether to trim taxes on house purchases.

``While July's slight increase could be the first sign of a stabilization, activity levels are still very low,'' Ann O'Kelly, economic and market analyst at Citigroup Inc., said in a research note.

Residential property prices fell 8.8 percent in July from a year earlier, the most in at least a quarter century, mortgage lender HBOS Plc said on Aug. 7.

To contact the reporters on this story: Jennifer Ryan in London at Jryan13@bloomberg.netBrian Swint in London at bswint@bloomberg.net.