U.K. November Home Loans Fall to Lowest Since 1994

By Brian Swint

Dec. 23 (Bloomberg) -- U.K. mortgage approvals fell to the lowest in 14 years in November as the contracting economy discouraged buyers and financial institutions declined to pass on the central bank’s interest-rate cuts, the British Bankers’ Association said.

Banks granted 17,773 loans for house purchase, down 61 percent from the same month in 2007, the London-based BBA, which represents the U.K.’s biggest banks, said today in a statement. The number of home loans was 20,767 in October.

The British economy shrank 0.6 percent in the third quarter, more than previously estimated, the statistics office said today. While the Bank of England has reduced the benchmark interest rate to the lowest since 1951, banks that have been stung by the global financial crisis are reluctant to lend against houses as their value declines, and potential buyers are concerned about losing their jobs in the slump.

“With house prices still falling, the encouragement of lower costs had not filtered through by the month-end,” David Dooks, statistics director at the BBA, said in the statement. “People remain concerned about the impacts of the rapidly slowing economy on their personal finances.”

House prices will drop 10 percent in 2009, Hometrack Ltd., a market researcher, predicted yesterday. The number of repossessions will almost double to 75,000 next year, the Council of Mortgage Lenders said last week.

U.K. mortgage rates fell by less than half of the Bank of England’s 1.5 percentage point interest-rate cut last month, central bank data showed Dec. 9.

To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net.