THE number of new mortgages issued to homebuyers has fallen to an all-time low in the latest sign of the economic downturn.
A total of 33,000 loans were approved by UK banks and building societies in July – down 71 per cent on the 114,000 issued in the same period a year earlier.
The news came as the pound fell to a record low against the euro – dropping to 81.21p
– and a two-year low against the US dollar, with £1 buying $1.80.
Yesterday was the first day of trading since Alistair Darling, the Chancellor, warned that Britain faced the worst economic crisis in 60 years.
The mortgage figures, issued yesterday by the Bank of England, were the lowest since records began in 1999. There was also a further drop in the number of people remortgaging their homes, to 69,000 in July.
Experts said Mr Darling's failure last month to rule out a possible stamp duty freeze had created uncertainty among buyers and sellers.
But there was hope that the market was close to bottoming out, as the July figure for new loans was only 2,000 fewer than in June, although it was the 12th consecutive monthly fall, and there was no guarantee of a quick rebound.
Separate figures last month from the Council of Mortgage Lenders showed Scotland was faring better than the rest of the UK, with 18,500 mortgages approved between April and June – a 34 per cent drop year on year, but better than the UK-wide decrease of 46 per cent.
Peter Bolton King, chairman of the National Association of Estate Agents (NAEA), told The Scotsman that the lack of availability of mortgages had eased slightly in recent weeks, but the market was still closed to first-time buyers without a deposit. "Providing you have a clear credit history and a deposit, there are mortgages out there," he said. "But I think an awful lot of the problem is about a lack of confidence."
Geoffrey Dicks, chief UK economist at Royal Bank of Scotland, said that the importance of the housing market could often be overstated, as only a minority of the population moved house each year, while rising energy, food and petrol prices affected everybody.
He said: "Moving house is extremely expensive, particularly if you are paying a lot of stamp duty. If you don't move house, you have money left for holidays or cars or whatever.
"At the level of the whole economy, housing works both ways. It spurs spending in some ways – if you sell 'big ticket' items that people typically purchase when they move house – but if you are not moving, it can also spur spending."
Crawford McCaughie, chairman of the Council of Mortgage Lenders Scotland, said: "We believe Scotland is not immune from what is happening, but it does appear to be performing better.
"Traditionally, Scottish house prices have not been as expensive as England."
Case study 1'All we can do is hope that the market improves'
MAIRI Cotter, 28, is an advertising executive working in Edinburgh.
"My partner and I bought a two-bedroom ex-local authority house in Stenhousemuir in October 2005. When you buy a house from the local authority, part of the deal is that you have to stay there for three years.
"We have now been in the house just over three years and need to upsize because of our daughter, but unfortunately we are having to wait to sell our house. At the moment, no-one knows what the markets are doing so we have to wait and see when the economic situation recovers. We don't want to leave the area because our daughter has just started at nursery and the school catchment area is really good here.
"Since we moved in, property prices in our area have risen dramatically.
However, despite this in the last six months the property price has fallen 16 per cent.
"All we can do now is hope the markets improve."
Case study 2'We can't stump up deposits of up to 25% '
RICHARD Meade, 30, of Edinburgh, works as a senior account manager at a PR firm.
"I currently share a flat with my brother. We have been living in a two-bedroom basement flat in London Street in the New Town of Edinburgh for the past two and a half years.
"With all bills and council tax included, it costs us £950 a month to rent. Although we have a nice flat and a good deal, there's no doubt we want to get on the property ladder.
"We want to pool our resources and buy a place together, because house prices are so out of reach. It's difficult for us to get a mortgage because we are struggling to get together enough money for a decent deposit, especially now that banks are being more cautious.
"We are finding lenders are tightening up their criteria in terms of good deals. For mortgages, we are finding the deposit offers usually range from between 10 per cent and 25 per cent. We can't stump up that amount of money."
Case study 3'Self-builds could reduce stamp duty'
ALISTAIR Formby, 54, is in the hotel and catering industry.
"We sold our house on the fringes of Castleford in West Yorkshire two years ago. It was a five-bedroom, detached house, in a third of an acre.
"I want to move my family to Perthshire and start another business, but I am currently waiting to see what happens with stamp duty as it has quite an impact on the higher end of the market.
"We have been living with my wife's parents for two years, but I'm willing to stay as long it takes until the market stabilises.
"In Scotland, property prices have held up relatively well compared to England.
"The upper end of the market has held up well – if you can afford a £500,000 house the credit crunch is not going to affect you as much as someone on the minimum wage.
"We have been looking at similar-sized houses to our last, but we are also thinking of self builds, as this could reduce the stamp duty."
The full article contains 1049 words and appears in The Scotsman newspaper.
